Reverse mortgages (also referred to as Home Equity Conversion Mortgages, abbreviated to HECM) are aiding older residents in California achieve greater monetary stability and enjoy their retirement living years to the fullest.
The HECM FHA insured reverse mortgage may be used by senior home-owners age 62 and older to transform the equity in their home to a monthly stream of extra cashflow and/or a line of credit to be paid back once they no longer live in the home.
The loan, commonly known as HECM, is funded by a loan company for example a mortgage lender, traditional bank, credit union or savings and loan association. To help the homeowner in making an educated determination of whether the program fulfills their requirements, they’re required to get consumer education and counseling using a HUD-approved HECM counselor.
Other California Cities: North Highlands, Foothill Farms, McClellan Park, Antelope, Sabre City
HECM counselors will discuss program qualification requirements, financial implications and alternatives to obtaining a HECM and specifications for the mortgage becoming due and payable. After the conclusion of HECM counseling, the homeowner must be able to make an independent, educated determination of whether or not this product will meet their requirements.
California home-owners who meet the eligibility criteria can complete a reverse mortgage application by getting in contact with a FHA-approved lender like a bank, loan company, or savings and loan association.
Borrower Requirements For Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your home and have substantial equity
Live in your house as a principal residence
Participation in a consumer information session offered by an authorized HECM counselor
Mortgage Amount Based On:
Age for the youngest homeowner
Current interest rates
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit history qualifications will be required of the homeowner
No repayment provided the property is the principal residence.
Costs may be financed in the mortgage
Real Estate Requirements:
Single family home or 1-4 unit home with one unit occupied by the borrower
HUD-approved condos
Manufactured homes on property
Meet FHA property specifications and flood requirements
How the HECM in California} Program Works For California Homeowners
Home owners 62 and older who have repaid their mortgages or have only small loan balances remaining, and are also currently living in the home meet the requirements to participate in HUD’s reverse mortgage program.
The loan enables homeowners to borrow from the equity in their properties. Homeowners can select 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 situations change can restructure their payment selections for a nominal fee of $20. Fees can vary dependant upon Loan company.
Contrary to regular home equity loans, a HUD reverse mortgage doesn’t require repayment so long as the home is the borrower’s primary residence. Mortgage lenders recover their principal, plus interest, whenever the home is sold. The rest of the value of the home would go to the homeowner or to their heirs. You can’t ever owe more than your home’s appraisal value.
If the sales funds are insufficient to cover the balance payable, HUD pays the lender the amount of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the homeowners to provide this coverage. This is the beauty of the HUD™ FHA guarantee.
The amount a homeowner may borrow is dependent on their age, current interest rate, other loan fees and the appraisal vlaue of their home or FHA ‘s mortgage limits with their area, whichever is less. Typically, the more valuable your property is, the older you are, the lower the interest, the more you can borrow.
There are no asset or income limitations on homeowners receiving HUD’s reverse house loan.
Additionally, there are no limits on the value of properties getting qualified for a HUD reverse mortgage. The value of the property will be determined by an appraisal. Nonetheless, the total 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 homeowners who obtain HECM mortgages. Homeowners are charged an upfront insurance premium that is 2% of the maximum claim amount which may be borrowed along with a .5% annual premium.