Reverse mortgages (often called Home Equity Conversion Mortgages, abbreviated to HECM) are aiding elderly residents in California achieve greater financial stability and enjoy their retirement years to the fullest.
The HECM FHA insured reverse mortgage can be used by senior home-owners age Sixty two and older to transform the equity in their property into a monthly stream of extra cash flow and/or a line of credit to be paid back once they do not inhabit the property.
The home loan, also known as HECM, is funded by a mortgage company such as a mortgage lender, bank, credit union or savings and loan association. To assist the home owner in making an educated determination of if the program meets their needs, they are required to receive consumer education and counseling from a HUD-approved HECM counselor.
Other California Cities: Bryte Mobile Home Park, Mikon, El Rancho Mobile Park, Casa Mobile Home Park, West Sacramento
HECM counselors will discuss program eligibility conditions, financial consequences and alternatives to receiving a HECM and provisions for the mortgage becoming due and payable. After the conclusion of HECM counseling, the home owner must be able to make an independent, informed determination of whether or not the product will meet their needs.
California homeowners who fulfill the eligibility criteria can complete a reverse mortgage application by contacting a FHA-approved lender like a bank, loan company, or savings and loan association.
Borrower Criteria When Getting A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your home as well as have substantial equity
Live in your house as a primary residence
Taking part in a consumer information session offered by an authorized HECM counselor
Mortgage Amount Based On:
Age of the youngest borrower
Current interest rates
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit history qualifications will be required of the borrower
No repayment provided that the home is the primary residence.
Costs may be financed in the mortgage
Property Requirements:
Single family house or 1-4 unit house with one unit lived in by the homeowner
HUD-approved condos
Manufactured homes on property
Meet FHA property conditions and flood requirements
How the reverse mortgage loan} Program Works For California Homeowners
Home-owners 62 and older who have repaid their mortgages or have only small loan amounts outstanding, and are currently residing in the property meet the requirements to take part in HUD’s reverse mortgage loan.
The loan allows homeowners to borrow against the equity in their properties. Homeowners can choose from five payment plans:
Tenure – equal monthly installments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term – equal monthly installmentsfor 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 installments for as long as the borrower remains in the home.
Modified Term – combination of line of credit with monthly installments 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 could differ depending on Loan company.
In contrast to ordinary home equity loans, a HUD reverse mortgage does not need repayment as long as the property is the borrower’s principal residence. Mortgage lenders regain their principal, plus interest, once the property is sold. The remaining value of the property goes to the homeowner or to their heirs. You can never owe in excess of your property’s appraisal value.
If the sales proceeds are not enough to pay the total payable, HUD will pay the lending company the amount of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the borrowers to provide this coverage. This is the beauty of the HUD™ FHA guarantee.
The total a homeowner may borrow depends upon how old they are, current interest rates, other loan costs and the appraised value of their property or FHA ‘s mortgage limits with their area, whichever is less. Typically, the more valuable your home is, the older that you are, the lower the interest rate, the more you’ll be able to borrow.
There aren’t any asset or cash flow restrictions on borrowers obtaining HUD’s reverse home loan.
In addition there are no limitations on the value of properties qualifying for a HUD reverse mortgage. The value of the home will be determined by an appraisal. Nevertheless, the total amount which can 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 homeowners who receive HECM mortgages. Homeowners are charged an upfront insurance premium that is 2% of the maximum claim amount which can be borrowed and then a .5 percent annual premium.