Homeowners who take out a reverse mortgage loan have the option of receiving the money as a lump sum, monthly payments, a line of credit, or a combination of the three.
The money from a reverse mortgage can be used to meet a range of financial goals from supplementing monthly income to funding major projects such as home renovations to establishing a source of funds to tap into in the event of unplanned expenses and even purchasing a new home, to name a few.
But not just anyone can take out a reverse mortgage. There are very specific requirements that need to be met in order to qualify.
The Reverse Mortgage Loan Requirements
Borrower Requirements
Borrowers must meet the following requirements in order to qualify for a reverse mortgage:
- Age. One of the homeowners must be at least 62 years of age or older.
- Residency. The home must be your primary residence. Investment properties and vacation homes do not qualify.
- Equity. Typically, the home needs to be paid off or you need a minimum of 50% equity in your home in order to qualify for a reverse mortgage loan. If you still have a traditional mortgage on the home, the reverse mortgage funds will first be used to pay off the mortgage.
- Counseling. Before you can officially file an application for a reverse mortgage, you must first complete a counseling session with a third-party counselor approved by the U.S. Department of Housing and Urban Development (HUD). The purpose of this counseling session is to educate potential borrowers on what’s involved in obtaining a reverse mortgage, costs and fees, and the pros and cons of a HECM loan. This typically takes approximately 90 minutes. The reverse mortgage advisors at Mutual of Omaha Mortgage will give you a list of qualifying counselors to contact.
Property Requirements
The following properties are eligible for a reverse mortgage:
- Single-family homes
- 2-to-4-unit properties in which you occupy one of the units
- Townhouses
- Condominiums that are FHA-approved
- Manufactured homes that meet HUD requirements and were built after June 1976
If you are uncertain if your property qualifies, the Mutual of Omaha Mortgage reverse mortgage advisors can assist you in making this determination.
Reach out today to learn more.
Financial Requirements
Unlike a traditional mortgage, you do not have to have good credit or meet income requirements in order to qualify for a reverse mortgage loan. However, there are some financial requirements and obligations that will need to be met.
For example, there are some costs and fees that will need to be paid to set up a reverse mortgage including the following:
- Origination fee
- Mortgage insurance premium
- Appraisal fee
Note that these costs can be included in the total loan amount, so you don’t need to tap into savings to cover them.
Homeowners must also demonstrate the ability to pay for the following:
- Property taxes
- Homeowner’s insurance
- Homeowners Association (HOA) fees, if required
- Home maintenance costs
Bottom Line
While there are several variables involved in qualifying for a reverse mortgage loan, the two most important criteria are that you are at least 62 years old and have significant equity in your home.
Our reverse mortgage advisors can help you understand more about whether you qualify for a HECM loan or not.
Reach out today to learn more!
Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.
This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement.
