Reverse mortgages (generally known as Home Equity Conversion Mortgages, abbreviated to HECM) are helping elderly residents in California achieve better monetary stability and enjoy their retirement years to the fullest.
The HECM FHA insured reverse mortgage can be used by senior homeowners age Sixty two and older to convert the home equity in their property into a monthly stream of additional cashflow and/or a credit line to be paid back when they cease to inhabit the property.
The home loan, often called HECM, is funded from a loan company such as a mortgage lender, traditional bank, credit union or savings and loan association. To assist the home-owner 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.
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HECM counselors will discuss program eligibility requirements, financial consequences and alternatives to getting 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, well informed decision of whether or not this product will fulfill their needs.
California home-owners who satisfy the eligibility criteria can complete a reverse mortgage application by getting in touch with a FHA-approved lender like a bank, loan company, or savings and loan association.
Borrower Requirements In Order To Get A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your own home and also have significant home equity
Reside in your property as a primary residence
Participation in a consumer information session given by an approved HECM counselor
Mortgage Amount Based On:
Age for the youngest consumer
Current interest 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 that 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 homeowner
HUD-approved condo properties
Manufactured homes on property
Meet FHA property guidelines and flood requirements
How a FHA reverse mortgage} Program Works For California Homeowners
Home-owners 62 and older which have paid in full their house loans or have only small home loan balances outstanding, and are also presently living in the property meet the criteria to take part in HUD’s reverse mortgage program.
The loan makes it possible for property owners to borrow on the equity in their homes. 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 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 can vary depending on Loan company.
Unlike regular home equity loans, a HUD reverse mortgage does not need repayment provided that 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 his or her heirs. You’re never going to owe above your property’s appraisal value.
If the sales funds are insufficient to cover the total due, HUD pays off the lending company the amount of the deficiency. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all homeowners to provide this coverage. This is the great thing about the HUD™ FHA guarantee.
The amount of money a homeowner may borrow is determined by what their age is, current interest rate, other loan fees and the appraisal vlaue of their property or FHA ‘s mortgage limits for their area, whichever is less. Typically, the more valuable your house is, the older that you are, the lower the interest, the more you’re able to borrow.
There are no asset or cash flow limitations on homeowners obtaining HUD’s reverse home loan.
Additionally, there are no restrictions on the value of homes being qualified for a HUD reverse mortgage. The value of the house will be determined by an appraisal. Nonetheless, the total amount that could be borrowed comes from the lower of the appraisal amount or FHA mortgage limit, which is $675,750.
HUD collects funds from insurance premiums charged to the property owners who obtain HECM mortgages. Homeowners are charged an upfront insurance premium which is 2% of the maximum claim amount which can be borrowed as well as a .5% annual premium.