Reverse mortgages (often called Home Equity Conversion Mortgages, shortened to HECM) are assisting elderly homeowners in California obtain an increased monetary security and enjoy their retirement years to the fullest.
The HECM FHA insured reverse mortgage could be used by senior home-owners age 62 and older to transform the home equity in their house to a monthly stream of extra cash flow and/or a credit line to be repaid once they no longer live in the house.
The mortgage, typically referred to as HECM, is funded by a mortgage company like a mortgage lender, traditional bank, credit union or savings and loan association. To support the homeowner in making an educated decision of if the program suits their needs, they’re required to receive consumer education and counseling by a HUD-approved HECM counselor.
Other California Cities: Antelope, Roseville, Orangevale, Sabre City, Foothill Farms
HECM counselors will talk about program qualification requirements, financial implications and alternatives to getting a HECM and specifications for the mortgage becoming due and payable. After the completion of HECM counseling, the homeowner should be able to make an independent, educated decision of whether the product will fulfill their needs.
California home-owners who fulfill the eligibility requirements can complete a reverse mortgage application by getting in touch with a FHA-approved lending institution such as a bank, loan company, or savings and loan association.
Borrower Standards To Get A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your home and have sizeable home equity
Reside in your home as a primary residence
Taking part in a consumer information session given by an approved HECM counselor
Mortgage Amount Based On:
Age for the youngest applicant
Current interest rates
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit history qualifications are required of the borrower
No repayment so long as the house is the primary residence.
Loan Costs may be financed in the mortgage
Property Requirements:
Single family house or 1-4 unit house with one unit lived in by the borrower
HUD-approved condo properties
Manufactured houses on land
Meet FHA property conditions and flood requirements
How a reverse mortgage lender} Program Works For California Homeowners
Property owners 62 and older which have repaid their home loans or have only small loan amounts outstanding, and are presently living in the house meet the criteria to participate in HUD’s reverse mortgage loan.
The loan permits home owners to borrow on the equity in their houses. Homeowners can choose 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 credit line with monthly payments for as long as the borrower remains in the home.
Modified Term – combination of credit line with monthly payments for a fixed period of months selected by the borrower.
Homeowners whose circumstances change can restructure their payment selections for a nominal fee of $20. Fees may vary dependant upon Loan provider.
Contrary to regular home equity loans, a HUD reverse mortgage doesn’t require repayment provided that the house is the borrower’s principal residence. Lenders recover their principal, plus interest, once the house is sold. The rest of the value of the house would go to the homeowner or to his / her heirs. You’re never going to owe greater than your house’s appraised value.
If the sales proceeds are insufficient to cover the total amount owed, HUD pays off the lending company the amount of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all borrowers to provide this coverage. This is the wonderful thing about the HUD™ FHA guarantee.
The total a homeowner can borrow is determined by their age, current interest rate, other loan charges and the appraised value of their house or FHA ‘s mortgage limits with their area, whichever is less. Usually, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.
There isn’t any asset or income limits on borrowers receiving HUD’s reverse house loan.
There are also no restrictions on the value of houses qualifying for a HUD reverse mortgage. The value of the home is determined by an appraisal. However, the total amount that may be borrowed is derived from the lower of the appraisal amount or FHA mortgage limit, which is $675,750.
HUD collects funds from insurance premiums charged to the home owners who obtain HECM mortgages. Homeowners are charged an upfront insurance premium that is 2% of the maximum claim amount which can be borrowed as well as a .5 percent annual premium.