How the FHA reverse mortgages works:

The FHA reverse mortgage allows homeowners the age of 62 or older the ability to tap into their equity without selling their home. The FHA reverse mortgage lender pays the borrower money based on the equity built up in the home. Borrowers are not required to make repayments on the reverse mortgage loan as long as the borrower lives in the home. FHA Reverse mortgage lenders recover the amount loaned when the home is sold. If the sales proceeds are insufficient to pay the reverse mortgage balance, the FHA reverse  mortgage insurance pays the lender the amount of the shortfall. The size of FHA reverse mortgage is determined by the borrower's age, the interest rate, and the home's value.

Basic FHA reverse mortgage qualifying:

• Must be 62 or older
• Must have equity in your current home
• No asset or income limitations
• No limits on the value of the homes used for qualifying for a reverse mortgage

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FHA reverse mortgage key points

• FHA Reverse mortgage Applicants must at least 62 years old and own a home.
• The size of the FHA  reverse mortgage loan you receive is determined by your age, the interest rate, and the home's value. The older a borrower, the larger the percentage of the home's value that can be borrowed.
• There are no asset or income limitations on borrowers receiving FHA reverse mortgages.
• FHA's reverse mortgage insurance makes FHA reverse mortgage program less expensive to borrowers.
• Unlike a traditional home loan the loan an FHA reverse mortgage never has to be paid back.
• FHA reverse mortgage does not require repayment as long as the borrower lives in the home. Borrowers must retain title ownership to the home. The lender never, at any point, owns the home, even after you (or last surviving spouse) permanently vacate the property.
• With an FHA reverse mortgage there are no out of pocket fees. Reverse mortgage fees can be financed. Only the FHA  upfront fee would be an appraisal which typically cost $350.00 depending on your market.
• Borrower is still obligated to pay the property taxes and insurance, and keep the home well maintained. Borrowers can request an escrow account to pay your property taxes and insurance.
• Repayment of the FHA reverse mortgage does not occur until your last surviving spouse permanently vacates the home. You or your heirs must then the pay back of the loan using either private funds or selling the home. After the loan is repaid, all excess proceeds from the sale of the home go to you and your heirs.
• Repayment of the FHA reverse mortgage is not required until (the last surviving spouse) permanently leaves the home as a primary residence.
• FHA reverse mortgages have a "non-recourse" feature, which means that the total amount owed can never exceed the appraised value of the home. If the amount owed exceeds the home's appraised value, then the FHA reverse mortgage lender or the FHA insurance will absorb that loss.

FHA Reverse Mortgage withdraw options

• Tenure – receive equal monthly payments as long as at least one borrower continues to occupy the property as a principal residence.
• Term - equal monthly payments for a fixed period of selected months.
• Line of Credit - unscheduled payments or in installments, at times and in amounts of borrower's choosing until the line of credit is exhausted.
• Modified Tenure - combination of monthly payments with line of credit for as long as the borrower remains in the home.

Reverse Mortgage Questions/Answers

FHA Reverse Mortgages are becoming popular more and more popular. The Department of Housing and Urban Development, (HUD) has created one of the first federally insured private loans. The FHA reverse mortgage is  a safe plan that can give older Americans greater financial security. Many seniors use social security to meet unexpected medical expenses, make home improvements, and more. Since your home is probably your largest single investment, it's smart to know more about reverse mortgages, and decide if it’s the right program for you.

1. What is a FHA reverse mortgage?

The FHA reverse mortgage is a type of home loan that allows a homeowners the age of 62 or older the ability convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments or appreciation can be paid to you. But unlike a traditional home loan or second mortgage, no repayment is required until the borrower no longer use the home as their principal residence. FHA reverse mortgage provides these benefits because it is federally insured.

2. How can I qualify for an FHA reverse mortgage?

To be eligible for a HUD reverse mortgage, FHA, the Federal Housing Administration requires that the borrower is a homeowner, and  62 years of age or older. The homeowners must either own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home as a primary residence. Homeowners are required to receive consumer information from FHA approved counseling sources prior to obtaining the loan.

3. Can I apply if I don’t currently have an FHA home loan?

To qualify homeowners’ are not required to have a FHA mortgage.

4. What types of homes are eligible for an FHA reverse mortgage?

Your home must be a single family dwelling or 1-4 multifamily homes that you own and occupy. Qualifying properties for FHA reverse mortgages include Townhouses, detached homes, condominiums and some manufactured and mobile homes are eligible. Condominiums must be FHA-approved. However It is possible for individual condominiums units to qualify under the Spot Loan program.

5. What's the difference between a FHA reverse mortgage and a banks home equity loan?

With a traditional refinance or a second mortgage, you must have sufficient income versus debt obligations to qualify for the loan. Traditional loans also require that you make monthly mortgage payments. The FHA reverse mortgage is different in that it pays you regardless of your current income. The amount you can withdraw depends on your age, the current interest rate, and FHA appraised value of your home or FHA the FHA loan limits for your area. In General, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the home is your principal residence. Like all homeowners, you still are responsible for your real estate taxes and traditional expenses like utilities, but with an FHA HUD Reverse Mortgage, you cannot be foreclosed or forced to leave your house because you missed your mortgage payment.

6. Can the lender take my home away if I outlive the loan?

No, the lender will never take the home away as long as the taxes and insurance are kept current. And, you do not need to repay the FHA reverse mortgage as long as you or one of the borrowers continues to live in the house.

7. Will I still have an estate that I can leave to my family?

When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the FHA reverse mortgage, plus interest and other fees, to the FHA reverse mortgage lender. The remaining equity in your home, if any, belongs to you and your family. None of your other assets will be affected by FHA reverse mortgage loan. This debt will never be passed along to your heirs.

8. How much money can I withdraw from my home?

The amount you can withdraw with an FHA revere mortgage depends on your age interest rates, and the FHA appraised value of your home or FHA  mortgage limits in your homes area, whichever is less. Generally, the more valuable your home, the older you are, the lower the interest rate, the more you can borrow.

9. Should I use an Consulting service to find a reverse mortgage?

FHA does NOT recommend using a non licensed consulting  service, FHA approved lenders and  mortgage companies offer this information without cost, and FHA approved housing counseling agencies are available for free, or at minimal cost, to provide FHA reverse mortgage information and  counseling.