Qualify for a Reverse Mortgage?
As people near retirement, they may believe that they are no longer viable candidates for loans. With their incomes deriving from pensions or Social Security benefits rather than steady paychecks, senior citizens might falsely think that banks, credit unions, and mortgage lenders will turn them away if they apply for loans. However, seniors now have the unique advantage of being apply to apply for financing that currently is unavailable to people younger than the age of 62. Rather than take out a conventional bank loan, senior citizens can instead apply for and receive cash based on the equity in their homes, a loan that is known as a Home Equity Conversion loan (HECM) or a reverse mortgage. Given this lending advantage, it can help seniors to know exactly if and how they can qualify for a reverse mortgage.
Does my home qualify?
One of the first criteria that lenders will consider involves the type of home in which a person lives. The house must be used as a primary residence and cannot be owned jointly with the person’s children or business partners. It typically must be owned by the loan applicant himself or herself, or that person and his or her spouse.
Along with ownership and primary use, lenders also typically accept homes that are single-family residences, condominiums, town homes, duplexes, or manufactured homes that comply with current FHA standards. The house cannot be a summer home or a second residence for the family. It also cannot be an apartment building or a building that is used for multiple tenants
Do I qualify based on my age?
People who apply for this loan must also meet the age requirements. Only those individuals who are aged 62 or older are welcome to apply for a reverse mortgage. People who are younger than that age will be denied. Likewise, married couples are welcome to apply as long as one of them are 62 or older. Until the other spouse reaches that age, the loan may be listed in the qualifying spouse’s name only, however.
What is the Mortgage Requirements?
Along with meeting the age and homeownership qualifications, people also must meet certain criteria in regards to the liens on their homes. If they have a mortgage on their home, seniors may be required to have most of it paid off before they can apply for this other source of financing. Likewise, the reverse mortgage must be used as the primary lien after they are approved for the loan.
How much equity do I need to qualify?
People applying for a reverse mortgage can be approved if they have equity built up in their home. A home that is in good condition and has a high appraisal value can be used to provide its owners with cash they can use to pay bills or simply add money to their bank accounts. Alternatively, a person whose home has depreciated value may be unable to take out a reverse mortgage on it. The entire loan is based on the equity value.
Credit Counseling Qualifications
Even people meet all of these other criteria, they will still be required to go through a credit counseling class before they can apply for a reverse mortgage. This class is now mandatory for all applicants, even those who are the most fiscally responsible. When they finish their counseling and have the necessary proof to present to their lender, they can then apply for an HECM loan.
Reverse mortgages continue to be relatively easy to obtain as long as senior citizens meet some basic requirements prior to their approval. When retirees and seniors believe that their financing options are limited because they no longer have steady careers, they can utilize this unique source of lending designed exclusively for them.