Reverse mortgages (also referred to as Home Equity Conversion Mortgages, abbreviated to HECM) are helping older people in California obtain additional personal financial security and enjoy their retirement years to the fullest extent.
The HECM FHA insured reverse mortgage can be utilized by senior property owners age 62 and older to convert the equity in their house into a monthly stream of extra cash flow and/or a line of credit to be paid back once they no longer live in the house.
The loan, also known as HECM, is funded by a lending institution like a mortgage lender, traditional bank, credit union or savings and loan association. To help the home owner in making an informed decision of whether the program satisfies their needs, they’re required to get consumer education and counseling by a HUD-approved HECM counselor.
Other California Cities: Folsom Junction, Folsom, Natoma, Alder Creek, Fair Oaks
HECM counselors will discuss program qualification conditions, financial implications and alternatives to receiving a HECM and provisions for the house loan becoming due and payable. After the conclusion of HECM counseling, the home owner must be able to make an independent, educated decision of whether or not the product will fulfill their needs.
California home owners who satisfy the eligibility criteria can complete a reverse mortgage application by speaking to a FHA-approved lender such as a bank, loan company, or savings and loan association.
Borrower Requirements When Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your property and have sizeable equity
Occupy your property as a primary residence
Taking part in a consumer information session offered by an authorized HECM counselor
Mortgage Amount Based On:
Age for the youngest borrower
Current mortgage rate
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit rating qualifications will be required of the applicant
No repayment providing the house is the primary residence.
Closing costs may be financed in the mortgage
Real Estate Requirements:
Single family house or 1-4 unit house with one unit lived in by the homeowner
HUD-approved condominiums
Manufactured houses on land
Meet FHA property specifications and flood requirements
How a local reverse mortgage expert} Program Works For California Homeowners
Home owners 62 and older that have paid back their house loans or have only small loan balances remaining, and are presently residing in the house meet the requirements to participate in HUD’s reverse mortgage program.
The loan enables property owners to borrow on 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 situations change can restructure their payment selections for a nominal fee of $20. Fees can vary based upon Financial institution.
As opposed to ordinary home equity loans, a HUD reverse mortgage does not need repayment provided the house is the borrower’s principal residence. Lenders regain their principal, plus interest, whenever the house is sold. The remaining value of the house goes to the homeowner or to his or her survivors. You can’t ever owe above your house’s appraisal value.
If the sales proceeds are not enough to pay the balance owed, HUD pays off the lending company the amount of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all borrowers to supply this coverage. That is the great thing about the HUD™ FHA guarantee.
The amount of money a homeowner may borrow will depend on how old they are, the current interest rates, other loan charges and the appraisal of their house or FHA ‘s mortgage limits for their area, whichever is less. Generally, the more valuable your home is, the older that you are, the lower the interest, the more you could borrow.
There aren’t any asset or cash flow limitations on borrowers obtaining HUD’s reverse home loan.
There are no limits on the value of properties being qualified for a HUD reverse mortgage. The value of the home is determined by an appraisal. However, the total amount that could 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 property owners who get HECM mortgages. Homeowners are charged an upfront insurance premium which is 2 percent of the maximum claim amount which may be borrowed plus a .5% annual premium.