Reverse Mortgage Eligibility

  • All reverse mortgage borrowers must be 62 and older
  • Must own property and occupy as primary residence
  • Participate in an information counseling session
  • Must have sufficient equity in the property
  • Property must meet FHA property standards
  • Must maintain home with needed repairs, property taxes and insurance

Loan Amount Based On

  • Age of youngest borrower
  • Current interest rate
  • Lesser of appraised value or the FHA insurance limit
  • An Image Slideshow - Reverse Mortgage Educator
  • An Image Slideshow - Reverse Mortgage Educator
  • An Image Slideshow - Reverse Mortgage Educator

Reverse Mortgage Scenarios

Below are actual case examples of how FHA HECM reverse mortgages can be used.
 

Scenario 1

A single woman aged 62 had a home that she owned free and clear. She was self-employed and wanted more security, as work was slow, and with the state of the economy she wasn't sure when or if business would pick up again. She decided on a Fixed Standard HECM, the home was appraised at $545,000 and she received $325,000 when the loan closed. With these funds she planned to make some conservative investments, tackle some long-delayed home improvements, and supplement her income.

Scenario 2

A married couple, ages 71 and 77, had a loan balance of $410,000. The husband was getting ready to retire, but was concerned about still being able to manage a $2300/month mortgage payment on a reduced income. The home was valued at $1,200,000, but the maximum FHA claim limit is $625,500. Based on that limit, they qualified for $405,000, which meant they had to bring in about $5000 to escrow to make up the difference. They were happy to do so, because with no more large mortgage payment they felt they could finally relax and enjoy retirement.

Scenario 3

A widow, age 76, lived in a manufactured home with her daughter. She was considering a reverse mortgage to supplement her income and make some needed repairs. Her manufactured home did not have a 433A certification for being fixed to a permanent foundation. The cost to get this was beyond her means, and she was afraid she was not going to be able to get the loan. However, her loan officer helped her find a company willing to do the work needed to receive the 433A and delay payment until the close of escrow. The home value came in at $325,000 and she received $228,000 to do all things she was hoping to do.

Scenario 4

A single man, age 79, was struggling to make ends meet. His loan balance was $325,000 with a monthly payment of $1750. His fixed retirement income was less and less able to cover all his bills, and he saw the reverse mortgage as a way to stay in his home and still free up a large chunk of income. However, he could not proceed right away because he owned a condominium in a complex that was not FHA approved. With the help of his loan officer, an FHA approval package was submitted to the condominium's mangagement company and they filled out the necessary information. The package was then submitted to FHA for processing, and after about 3 weeks the approval was granted, and the loan process could move forward. At an appraised value of $525,000 he was able to have his loan paid off and receive $80,000 in cash in addition. Not only was he pleased, so were some other neighbors in the complex who could now take advantage of the complex being FHA approved.

Scenario 5

A married couple, both 77 years old, wanted to buy a home near their daughter. They couldn't get enough cash out of selling their current home to pay for the next home in cash, and their income wasn't enough to qualify for a regular mortgage. They did, nowever, have enough money to make the required down payment for a HECM purchase. They were able to buy a $450K home close to their daughter, using $155K down payment (about 34%). The HECM made up the difference, and now they have a nice home near family with no mortgage payments at all. The wife literally said, "I feel like I won the lottery!"

Scenario 6

A married couple, ages 68 and 71, were able to make ends meet for their own needs, but their children were having financial problems. They decided to get a lump sum with a low fixed rate on their house valued at $388K, that they owned free and clear. They ended up with $240K for their bank account, which put them in a great position to help their children and grandchildren either with the occasional smaller gift, or maybe with larger amounts like for college. They figured the equity of the house was going to the kids anyway, why not make at least some of it available now, when the kids really need it and they can enjoy giving it?

Scenario 7

A married couple, both age 70, thought they were set for retirement, with several properties and a number of investments. But then he lost his job, and between that and an economic turndown, the investments were suddenly worth much less. The home they were living in was upside down in value, so they couldn't do a reverse mortgage on that home. They ended up doing a short sale on the primary residence, and moved into one of their rental homes that had equity. On a value of $195K, paying off a $91K mortgage, they got about $23K in their pocket to help rebuild their cushion, and also eliminated their mortgage payments.

Scenario 8

A widow, age 80, lived in a condo in an FHA approved condo complex. The condo needed a number of repairs and upgrades, but she did not have the financial resources to do that. A few of the repairs were necessary just to pass the FHA appraisal, and a repairman was located who agreed to do the repairs and defer payment until after the close of the loan. On a value of $355K, paying off a mortgage balance of $140,767, she received $92,651. With this money, she was not only able to pay off the repairs already done and complete others, she was able to take a trip with her daughter and have a liquid financial cushion she never had before.

 
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California reverse mortgage scenario examples
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