Reverse mortgages (generally known as Home Equity Conversion Mortgages, shortened to HECM) are assisting elderly homeowners in California obtain additional financial security and enjoy their retirement living years to the fullest.
The HECM FHA insured reverse mortgage can be utilized by senior home-owners age 62 and older to convert the equity inside their home to a monthly flow of extra cash flow and/or a line of credit to be repaid once they no longer occupy the home.
The loan, commonly known as HECM, is funded by a loan company for example a mortgage lender, bank, credit union or savings and loan association. To support the home owner in making an informed decision of if the program meets their requirements, they are required to get consumer education and counseling from a HUD-approved HECM counselor.
Other California Cities: Folsom, Natoma, Prairie City, Orangevale, Alder Creek
HECM counselors will discuss program qualification requirements, financial consequences and alternatives to receiving a HECM and specifications for the home loan becoming due and payable. After the conclusion of HECM counseling, the home owner will be able to make an independent, educated decision of whether this product will meet their requirements.
California homeowners who meet the eligibility criteria can complete a reverse mortgage application by getting in touch with a FHA-approved lending institution like a bank, mortgage company, or savings and loan association.
Borrower Specifications When Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your property and also have considerable equity
Live in your home as a primary residence
Participation in a consumer information session provided by an approved HECM counselor
Mortgage Amount Based On:
Age of the youngest borrower
Current interest rates
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit history requirements will be required of the applicant
No repayment provided the home is the primary residence.
Mortgage Fees may be financed in the mortgage
Real Estate Requirements:
Single family home or 1-4 unit home with one unit lived in by the borrower
HUD-approved condo properties
Manufactured homes on land
Meet FHA property guidelines and flood requirements
How a reverse mortgage loans in California} Program Works For California Homeowners
Home-owners 62 and older which have repaid their house loans or have only small home loan balances outstanding, and are currently living in the home meet the criteria to participate in HUD’s reverse mortgage program.
The loan permits home-owners to borrow from the equity in their properties. Homeowners can select from five payment plans:
Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term – equal monthly paymentsfor a fixed period of months selected.
Line of Credit – unscheduled payments or in installments, at times and in amount of borrower’s choosing until the line of credit is exhausted.
Modified Tenure – combination of line of credit with monthly payments for as long as the borrower remains in the home.
Modified Term – combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
Homeowners whose conditions change can restructure their payment selections for a nominal fee of $20. Fees may vary based upon Loan company.
As opposed to standard home equity loans, a HUD reverse mortgage doesn’t require repayment provided that the home is the borrower’s primary residence. Financial institutions recover their principal, plus interest, once the home is sold. The remainder of the value of the home would go to the homeowner or to their heirs. You can’t ever owe more than your home’s appraisal value.
If the sales funds are inadequate to repay the balance owed, HUD pays the financial institution the amount of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the homeowners to supply this coverage. This is the beauty of the HUD™ FHA guarantee.
The amount a homeowner can borrow is dependent on their age, current interest rates, other loan costs and the appraised value of their home or FHA ‘s mortgage limits for their area, whichever is less. Generally, the more valuable your home is, the older that you are, the lower the interest, the more you’re able to borrow.
There are no asset or cash flow restrictions on homeowners receiving HUD’s reverse house loan.
There’s also no restrictions on the value of properties qualifying for a HUD reverse mortgage. The value of the home is determined by an appraisal. However, the total that may be borrowed comes from the lesser of the appraisal amount or FHA mortgage limit, which is $675,750.
HUD collects funds from insurance premiums charged to the home-owners who receive HECM mortgages. Homeowners are charged an upfront insurance premium which is 2 percent of the maximum claim amount which can be borrowed along with a .5 percent annual premium.