Reverse mortgages (generally known as Home Equity Conversion Mortgages, shortened to HECM) are aiding elderly residents in California achieve greater personal financial stability and enjoy their retirement years to the fullest extent.
The HECM FHA insured reverse mortgage may be used by senior home owners age Sixty two and older to convert the equity in their house into a monthly stream of extra cashflow and/or a line of credit to be paid back once they no longer live in the house.
The mortgage, often called HECM, is funded by a lending institution for example a mortgage lender, traditional bank, credit union or savings and loan association. To assist the home-owner in making an educated determination of if the program suits their requirements, they’re required to receive consumer education and counseling from a HUD-approved HECM counselor.
Other California Cities: Fruitridge Pocket, Parkway-South Sacramento, Polk, Cordova, Brighton
HECM counselors will discuss program eligibility requirements, financial consequences and alternatives to receiving a HECM and specifications for the house loan becoming due and payable. After the conclusion of HECM counseling, the home-owner must be able to make an independent, well informed determination of whether this product will satisfy their requirements.
California homeowners who satisfy 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 Criteria In Order To Get A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your home as well as have substantial equity
Reside in your property as a principal residence
Taking part in a consumer information session offered by an authorized HECM counselor
Mortgage Amount Based On:
Age for the youngest homeowner
Current mortgage rate
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit requirements will be required of the applicant
No repayment provided the house is the principal residence.
Fee 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 condominiums
Manufactured homes on property
Meet FHA property conditions and flood requirements
How the FHA reverse mortgage in California} Program Works For California Homeowners
Homeowners 62 and older which have paid off their house loans or have only small home loan balances outstanding, and are presently residing in the house meet the requirements to participate in HUD’s reverse mortgage program.
The loan permits home-owners to borrow from the equity in their homes. 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 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 options for a nominal fee of $20. Fees can vary dependent on Loan company.
In contrast to standard home equity loans, a HUD reverse mortgage does not require repayment provided that the house is the borrower’s primary residence. Mortgage companies regain 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 or her heirs. You can never owe above your house’s appraised value.
If the sales funds are insufficient to cover the total amount owed, HUD will pay the lending company the sum of the deficiency. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the homeowners to provide this coverage. That is the great thing about the HUD™ FHA guarantee.
The amount a homeowner can borrow is determined by their age, current interest rates, other loan fees and the appraised value of their house or FHA ‘s mortgage limits with their area, whichever is less. Normally, the more valuable your property is, the older you are, the lower the rate, the more you are able to borrow.
There isn’t any asset or cash flow restrictions on homeowners obtaining HUD’s reverse mortgage.
There are also no limitations on the value of homes being qualified for a HUD reverse mortgage. The value of the property is determined by an appraisal. Nonetheless, 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 get HECM mortgages. Homeowners are charged an upfront insurance premium that is 2 percent of the maximum claim amount that may be borrowed plus a .5% annual premium.