Reverse mortgages (known as Home Equity Conversion Mortgages, shortened to HECM) are serving to elderly people in California obtain better financial stability and enjoy their retirement living years to the fullest.
The HECM FHA insured reverse mortgage could be used by senior home-owners age 62 and older to convert the equity in their property into a monthly flow of additional cashflow and/or a credit line to be repaid once they no longer live in the property.
The mortgage loan, often called HECM, is funded from a loan company like a mortgage lender, traditional bank, credit union or savings and loan association. To assist the homeowner in making an informed determination of if this program meets their needs, they are required to get consumer education and counseling from a HUD-approved HECM counselor.
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HECM counselors will discuss program eligibility conditions, financial consequences and alternatives to receiving a HECM and provisions for the mortgage becoming due and payable. Upon the conclusion of HECM counseling, the homeowner should be able to make an independent, educated determination of whether or not this product will meet their needs.
California home owners who fulfill the eligibility requirements can complete a reverse mortgage application by speaking to a FHA-approved lending institution like a bank, mortgage company, or savings and loan association.
Borrower Requirements To Get A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your home as well as have significant equity
Live in your house as a principal residence
Taking part in a consumer information session offered by an approved HECM counselor
Mortgage Amount Based On:
Age for the youngest applicant
Current interest rate
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit history qualifications are required of the borrower
No repayment provided the house is the principal residence.
Loan Costs may be financed in the mortgage
Property Requirements:
Single family home or 1-4 unit home with one unit occupied by the homeowner
HUD-approved condo properties
Manufactured homes on land
Meet FHA property requirements and flood requirements
How a local reverse mortgage specialist} Program Works For California Homeowners
Home owners 62 and older which have paid off their mortgages or have only small mortgage balances outstanding, and are currently residing in the property meet the requirements to participate in HUD’s reverse mortgage program.
The loan allows homeowners to borrow against the equity in their homes. 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 credit line with monthly installments for as long as the borrower remains in the home.
Modified Term – combination of credit line with monthly installments 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 may vary based upon Loan company.
As opposed to regular home equity loans, a HUD reverse mortgage does not require repayment provided the property is the borrower’s principal residence. Mortgage lenders regain their principal, plus interest, once the property is sold. The rest of the value of the property goes to the homeowner or to their survivors. You can never owe more than your property’s appraisal value.
If the sales funds are insufficient to pay the total amount due, HUD pays the lender the amount of the deficiency. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the homeowners to provide this coverage. This is the great thing about the HUD™ FHA guarantee.
The amount of money a homeowner could borrow depends on how old they are, the current interest rate, other loan fees and the appraisal of their property or FHA ‘s mortgage limits with their area, whichever is less. Generally, the more valuable your property is, the older you are, the lower the interest, the more you’ll be able to borrow.
There are no asset or cash flow limits on homeowners acquiring HUD’s reverse home loan.
In addition there are no restrictions on the value of homes getting qualified for a HUD reverse mortgage. The value of the property will be determined by an appraisal. Nonetheless, the total which can be borrowed is derived from the lesser of the appraisal amount or FHA mortgage limit, which is $675,750.
HUD collects funds from insurance premiums charged to the homeowners who obtain HECM mortgages. Homeowners are charged an upfront insurance premium that is 2 percent of the maximum claim amount which can be borrowed as well as a .5% annual premium.