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California Reverse Mortgage Guide

Are you a homeowner in California who is at least 62 years old and looking for a way to leverage the equity in your home?

As California homeowners enter retirement, many seek solutions that enable them to increase their cash flow, fund home renovations, pay off consumer debt, offset their retirement savings, or any number of needs.

One option to consider is to access the equity they have built up in their homes through a reverse mortgage.

A reverse mortgage is a federally backed loan that allows eligible homeowners to borrow against their home’s equity without the burden of making monthly mortgage payments.

In this California Reverse Mortgage Guide, we provide information about reverse mortgages, exploring their types, qualifications, borrower rights, and the application process.

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What is a Reverse Mortgage?

A reverse mortgage lets homeowners who are at least 62 years of age a way to borrow against the equity in their homes.

A reverse mortgage is a federally backed loan that gives borrowers the option to receive their funds as a lump sum, monthly installments, a line of credit, or a combination of those methods.

One of the perks of a reverse mortgage is that it does not require monthly mortgage payments to pay it back like a home equity loan, home equity line of credit (HELOC), or a traditional mortgage.

The reverse mortgage is repaid upon the sale of the home, if it ceases to be the principal residence, the homeowners fail to meet other requirements, or when the homeowner passes away.

What Kinds of Reverse Mortgages Can You Get in California?

There are four types of reverse mortgages that qualifying homeowners can get in California:

Home Equity Conversion Mortgage (HECM)

Also known as HECM loans, the HECM reverse mortgage is the most common type of reverse mortgage offered by the majority of lenders, including Mutual of Omaha Mortgage. HECM reverse mortgages are backed by the Federal Housing Administration (FHA) and regulated by the U.S. Department of Housing and Urban Development (HUD). They are only available to borrowers who are 62 years of age and older. It is these types of reverse mortgages that we are addressing in this guide. There are no rules about how these reverse mortgages have to be used. There is a lending limit set by the FHA. The current limit for 2024 is $1,149,825.

Single-Purpose Reverse Mortgage

Single-purpose reverse mortgages are the least common type of reverse mortgage. They are also known as property tax deferral programs and deferred payment loans. These programs are also only available to homeowners who are at least 62 years of age. These reverse mortgages may only be used for one purpose, that is approved by the lender, which is typically a home improvement project. 

Jumbo Reverse Mortgage

Jumbo reverse mortgages are proprietary reverse mortgages that allow homeowners to borrow more than the FHA lending limit of $1,149,825. These reverse mortgages are white labeled by each lender, and they are not backed by the FHA. Jumbo reverse mortgages typically come with higher interest rates, but they also don’t require mortgage insurance premiums. 

HECM for Purchase

A Home Equity Conversion Mortgage for Purchase (HECM for Purchase) is a unique financial tool that allows homeowners to finance part of their new home with a reverse mortgage. This is done in combination with a large down payment from the sale of a previous home. This allows older homeowners to upsize or downsize in their retirement without taking on monthly payments. 

California Reverse Mortgage Requirements

In order to qualify for a reverse mortgage loan in California, you must meet the following requirements:

  • At least one homeowner must be at least 62 years old
  • The home must be the primary residence of the homeowners
  • Homeowners need to have equity in their home
  • The home must be in good condition
  • The homeowners must be able to continue to pay the property taxes, homeowner’s insurance, HOA fees (if applicable), and maintain the home
  • The property must be eligible for a reverse mortgage, which means it needs to be a single-family home, a two-to-four-unit property in which the homeowners occupy one of the units, an FHA-approved condominium, or an approved manufactured home
  • Any prospective borrower must also complete a counseling session with a third-party counseling service that is approved by HUD

California Reverse Mortgage Borrower Rights

In addition to the protections offered by the FHA and HUD, California also has some unique rules that are unique to homeowners living in the Golden State. Here are the rights that California reverse mortgage borrowers can expect:

Right to Cancel

After California homeowners complete the mandatory counseling session, they are given seven-days before lenders are able to file the application or charge homeowners any fees.

Disclosures

Before applicants complete the mandatory counseling session, lenders are required to provide the homeowners with the Reverse Mortgage Worksheet Guide and the Important Notice to Reverse Mortgage Loan Applicant.

No Annuities from Lenders

Lenders are prohibited from pitching annuities to homeowners or making a referral to someone who sells annuities.

Contract Language

Lenders are required to provide contracts with those who primary language is Chinese, Korean, Spanish, Tagalog, or Vietnamese in the respective language before loan documents can be signed.

In California, reverse mortgages lenders are licensed by the Department of Financial Protection and Innovation (DFPI) under the California Residential Mortgage Lending Act. Reverse mortgages in California are regulated by the California Department of Real Estate (DRE).

[Source: Los Angeles County Consumer & Business Affairs] 

California Reverse Mortgage Calculator

If you are considering a reverse mortgage loan, and you want to find out how much you might be able to qualify for, check out our Reverse Mortgage Calculator.

Please note the amount provided by this calculator is only an estimate. To find out more accurate numbers, we recommend talking to a reverse mortgage loan officer.

The California Housing Market 

The housing prices in California have skyrocketed over the last four years. In January 2020, the median sale price was $546,800, according to Redfin. As of April 2024, the median sale price was $852,800, which is a 56 percent increase.

While this has made the California real estate market a tough market for buyers, this increase in housing prices also means an increase in home equity for California homeowners. One way to access home equity for homeowners more than 62 years of age is through a reverse mortgage loan.  

The California Reverse Mortgage Loan Application Process

One thing to know about the reverse mortgage application process is that it is not fast. In some cases, it can take up to 45 days to complete the process. That means that if a reverse mortgage is something you are seriously considering pursuing, you may not want to put off getting the application process started.

One of the protections that comes with a reverse mortgage is that if you decide you don’t want to move forward with a reverse mortgage, you can cancel the application at any time, including three business days after you sign the closing loan documents.

If you apply for a reverse mortgage with Mutual of Omaha Mortgage, here is what you can expect:

Step 1: Talk to Reverse Mortgage Loan Officer

The first step is to meet with one of our reverse mortgage loan advisors who will assess your situation, provide an estimate of potential benefits, and address any questions you may have. The Mutual of Omaha Mortgage loan specialists will work with you through the entire process.

Step 2: Counseling

After your financial review with your reverse mortgage advisor, you must undergo a counseling session with a HUD-approved third-party counselor, aimed at educating you about reverse mortgage features, suitability, and other financial options. Once completed, the counselor will give you a certificate that will need to be to be presented to your advisor before officially filing the reverse mortgage application. This step ensures that you are making an informed decision.

Step 3: File the Application

Once the counseling certificate is received from your counseling session, your reverse mortgage loan advisor will assist in submitting your application and required documentation, which will likely include a photo ID, homeowner’s insurance policy, and property tax bill. Gathering this documentation at this stage will result in a faster loan closure.

Step 4: Appraisal and Other Information Ordered

After submitting your application, Mutual of Omaha Mortgage will order a home appraisal to evaluate the condition and market value of your home. This will help in determining the eligible loan amount. Other information that will be ordered at this time is a title and credit report to check for liens and to assess your financial health. This process typically takes one to two weeks to complete.

Step 5: Processing and Underwriting

After submitting the application and documentation, the manual underwriting process begins, where the underwriter verifies that all reverse mortgage requirements are met and determines if the loan is approved. The underwriter may request additional documentation or home repairs before finalizing the loan. Your reverse mortgage loan advisor will notify you about any necessary actions.

Step 6: Closing

After approval of the application, a closing date will be scheduled, offering the option to sign the closing documents at home with the assistance of a mobile notary service or in person at the title company.

Step 7: Receive Funds

Following the signing of the closing documents, a mandatory three-business-day waiting period will ensue before the funds are disbursed based on the method(s) selected during the application process.

Retiring in California 

While California is known for having a high cost of living, heavy traffic, and natural disasters such as earthquakes and wildfires, there are also a lot of reasons and features of the Golden State that make it appealing to those in retirement.

What California has to offer retirees:

Less Expensive Smaller Cities and Other Options

It’s true. California ranks number 50 for cost-of-living, according to U.S. News and World Report.  

But if you want to retire in California, you don’t have to move the larger and more expensive areas such as Los Angeles, San Francisco, or San Diego. The current median sales price of homes in California is a whopping $852,800, according to Redfin.

But there are plenty of smaller cities in both Northern and Southern California that are a lot more affordable. For example, in the following cities, the median home price is below $500,000:

  • Tulare
  • Porterville
  • Yuba City
  • Fresno
  • Visalia
  • Bakersfield
  • Madera
  • Merced
  • Modesto
  • Stockton
  • Victorville
  • Hemet
  • San Bernadino
  • Moreno Valley
  • Menifee

If you want to live in an area that is typically more expensive such as Orange County, but also closer to the beach, retirees can find more affordable housing by choosing a 55+ community. For example, there are condos for sale in Laguna Woods for as low as $325,000, according to 55places.com. 

[Sources: https://www.redfin.com/blog/affordable-places-to-live-in-california, https://www.redfin.com/blog/affordable-places-to-live-in-southern-california]

Theater and Music

While New York is known for Broadway, California has a lot to offer theater goers. California residents can go see Broadway shows such as Hamilton, Wicked, The Book of Mormon, and more in Los Angeles.

But if you don’t want to drive to LA to see good theater, there are plenty of regional theaters residents can frequent including the following:

  • Mondavi Center in Davis
  • Paramount Theatre in Oakland
  • Warners Center for the Performing Arts in Fresno
  • Berkley Repertory Theatre in Berkeley
  • Soka Performing Arts Center in Aliso Viejo
  • La Jolla Playhouse in La Jolla
  • California Center for the Arts in Escondido
  • Center for the Arts in Chico
  • Old Globe Theatre in San Diego
  • Segerstrom Center for the Arts in Orange County

[Sources:  https://www.california.com/the-best-theaters-in-california-for-live-performances]

Beaches

If you’ve always envisioned a retirement where you spend many hours walking or relaxing on the beach, California will not disappoint. With 840 miles of coastline, there is no shortage of beaches in California.  

California’s beaches are renowned for their stunning natural beauty. The picturesque coastlines, dramatic cliffs, and serene ocean views provide a tranquil and aesthetically pleasing environment 

There are urban beach cities such as Long Beach, artsty beach cities such as Laguna Beach, small beach towns such as Fort Bragg and Shelter Cove, and everything in between.  

The beaches offer numerous recreational activities such as walking, swimming, fishing, boating, and beachcombing.

Mountains and Lakes

Yes, California has no shortage of beaches, but if you prefer mountain life or at least want access to mountains, you will not be disappointed.  

Approximately 45 percent of California’s land area is covered by mountains. This includes several prominent mountain ranges such as the Sierra Nevada, the Coast Ranges, the Klamath Mountains, the Transverse Ranges, and the Peninsular Ranges.  

California is also home to approximately 3,000 named lakes, dry lakes, and reservoirs. These bodies of water vary significantly in size, with some of the largest including the Salton Sea, Lake Tahoe, Goose Lake, and Mono Lake.

Dining

California is known for its cultural diversity, which is reflected in its dining options. Residents can enjoy a wide range of international cuisines, including Mexican, Chinese, Japanese, Thai, Indian, Italian, and many more. 

California is a leader in the farm-to-table movement, emphasizing fresh, locally sourced ingredients. The state’s fertile agricultural regions provide a bounty of fresh produce, meats, and dairy, which many restaurants incorporate into their menus. 

For those who value fine dining, California is home to a number of Michelin-starred restaurants, especially in metropolitan areas like San Francisco, Los Angeles, and Napa Valley.

Wineries

California is renowned for its world-class wineries, offering residents a wealth of options in both Northern and Southern California. 

In Northern California, Napa Valley stands out with more than 400 wineries, known for premium Cabernet Sauvignon and Chardonnay. Sonoma County provides a more relaxed atmosphere with wines like Pinot Noir and Zinfandel. 

Southern California’s primary wine region, Temecula Valley, is famous for Syrah and Zinfandel. Santa Barbara County, including the Santa Ynez Valley and Sta. Rita Hills, is known for Pinot Noir and Chardonnay. 

These regions not only offer exceptional wines but also contribute to California’s rich cultural and recreational landscape, making it a prime destination for wine enthusiasts.

Climate

California’s climate is one of the most appealing features of the Golden State. The state boasts of a Mediterranean climate, characterized by mild, wet winters and hot, dry summers, particularly along the coast and in the central valleys.  

This means that residents can enjoy outdoor activities year-round. The abundance of sunny days and comfortable temperatures contribute significantly to the state’s allure, making everyday life feel like a vacation. 

Additionally, California’s varied geography allows for a range of microclimates, offering something for everyone.  

For example, coastal areas benefit from cooling ocean breezes, keeping temperatures moderate even in the summer. In contrast, places like the Sierra Nevada and Lake Tahoe experience snowy winters, providing excellent conditions for skiing and snowboarding.

Find a California Reverse Mortgage Loan Officer in Your Area

Mutual of Omaha Mortgage is a licensed Reverse Mortgage lender in the state of California. You can get started by calling 800-578-0283 or filling out this form here.

You can also find a California Reverse Mortgage loan officer in your area through our loan officer directory or by clicking on one of the links below to find a loan officer near you:

Reverse mortgage 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. 

Get Your Free Reverse Mortgage Guide Here!
Download the Guide