Reverse Mortgage Qualifications
The foremost qualification that applicants must meet involves their age. Specifically, people who want to apply for a reverse mortgage must be at least 62 years of age or older. Given the nature of this type of financing, applicants who are younger than 62 will be turned down or perhaps advise to apply for a bank loan instead. Individuals who are this age or older typically are preparing for their retirements, if they are not retired already, and thus are given special access to financing that is not otherwise designed for younger applicants.
Along with meeting the age requirement, people must also possess homes that meet certain standards. A person’s home must be a single family residence or it must be a 2 to 4 unit house. Alternatively, manufactured homes that were built after 1976, townhomes or duplexes, as well as condominiums will be eligible for a reverse mortgage. A person’s home cannot be a coop or shared with anyone other than the primary applicant.
People who apply for a reverse mortgage must live in the home for which they are applying for this loan. It must be their primary residence and they must live in it rather than in a secondary home. Summer homes, vacation getaways, and other spare residences cannot be considered for this type of financing. People who own more than one home or those who stay in an RV, apartment, or other location instead of the house on the application most often will be denied.
Applicants requesting a reverse mortgage on their homes will be expected to have equity in their homes. They must have additional value in their homes that can then be turned into cash that they can use for bills, savings, or other personal uses. When they apply for the loan, they may be expected to provide proof of the appraisal value of their home or have their home professionally appraised by their lender. This equity amount will be used to determine how much money they will be eligible for if they are approved.
Aside from having equity built up in their homes, people will also be expected to have paid off most or all of their existing mortgages. If they still owe $50,000 on the mortgage, for example, they could qualify for a $100,000 reverse mortgage, allowing them to pay off the existing mortgage and still have money left over to put into their bank accounts. The amount of their existing mortgage, if any, will be used as well to determine for how much money they are approved. Ideally, people who owe the least or nothing at all could reap the most benefits from this line of financing.
Debt Counseling Requirement
Even if people have great credit and have very little personal debt, they will still be asked to go through debt counseling before they can be approved for a reverse mortgage. This credit counseling is required by both the lender and the federal government. People who refuse to go through the session will be denied for financing. However, applicants who go through the class will learn more about this type of financing, which can help clear up any lingering doubts or questions that people may have. It will also help people understand what will happen to their homes after they pass on and whether or not the loan will factor into their eligibility for Medicare and Social Security.
Insurance and Tax Requirements
People who apply for this type of loan sometimes assume that the lender will take over paying for the home’s taxes and insurance. However, just as with a traditional mortgage, homeowners will be expected to carry an active homeowner’s insurance policy and keep the taxes paid up on their home. The lender will not assume these expenses. If they fail to pay for either expense, they could risk losing their home to the lender or to the state or federal government.
Current Tax Status Requirements
Applicants requesting this line of financing must be current on their federal taxes. They cannot be behind in paying taxes to the federal government, nor can they outright refuse to file taxes each year. People who are late on tax payments or who must file several years’ worth of returns must get caught up on their tax obligation to the government before they can be approved for the loan. However, people who are delinquent in state taxes may still be eligible to be approved for a reverse mortgage.
Reasonable Credit Expectations
While being approved for a reverse mortgage arguably does not require the stringent credit qualifications found with traditional bank loans, people will still be expected to meet reasonable credit standards. People who are in the middle of filing bankruptcy, who still have open bankruptcy case in federal court, or who expect to file bankruptcy soon will be declined for financing. Likewise, people who have extremely poor credit or open court judgments against them may be put through more scrutiny that people who have better credit.
Getting the money that senior citizens need to pay bills and bulk up their savings can be accomplished with a reverse mortgage. As more seniors become aware of this financing option, they would do well to understand the criteria for being approved. These guidelines can help them prepare for the application process and perhaps make being approved easier.