What Is FHA’s HECM Reverse Mortgage?
The Federal Housing Administration offers Home Equity Conversion Mortgages (HECM) to senior citizens. This gives homeowners access to their equity without payments.
A reverse mortgage is exactly what the name says. It pays senior homeowners cash in the form of a loan backed by their home’s equity value. All the owners must be at least 62 years old and signers on the reverse mortgage. As long as one of the borrowers uses the home for their primary residence, repayment of the loan is not required. The loan will be repaid when the home is sold.
How is the FHA’s HECM special compared to private lender’s reverse mortgages?
The HECM is the only reverse mortgage insured by the US federal government. The FHA charges a 2% mortgage insurance premium (mip) at the closing of the HECM. This mip can be financed with proceeds from the reverse mortgage. The FHA also collects a 0.5% monthly mip as well. This insures that if the house is sold at a loss the homeowner or his/her estate will not have to pay the difference between the loan and the funds from the sale of the home. The insurance will pay the lender the difference so no homeowner loses when the HECM is repaid.
How do I find out the eligibility requirements for an HECM?
The first step is to contact an HECM counselor. This is an FHA requirement before you can apply for the HECM. The counselor will review all the HECM requirements, benefits and possible disadvantages of HECM. With this information potential borrowers can choose an HECM with confidence.
Are there out of pocket costs such as closing costs, points or appraisals?
Based on the lender and the state of residence there will be upfront costs. They can be paid with the loan proceeds.
Related posts
- If I Have A Reverse Mortgage And I Die, Does My Family Need to Abandon The Property?
- Do Both Homeowners Need to Be 62 in Order to Get a Reverse Mortgage?
- Why Do I need To Get Counseling For A Reverse Mortgage?
- How Does A Reverse Mortgage Work?
- If I Still Owe Money On A First And Second Mortgage, Can I Still Get A Reverse Mortgage?
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