Reverse mortgages (known as Home Equity Conversion Mortgages, shortened to HECM) are serving to elderly home owners in California gain better economical security 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 transform the home equity inside their property to a monthly flow of additional cashflow and/or a credit line to be paid back once they do not occupy the property.
The loan, typically referred to as HECM, is funded by a lending institution like a mortgage lender, bank, credit union or savings and loan association. To help the homeowner in making a knowledgeable decision of whether the program fulfills their needs, they are required to receive consumer education and counseling from a HUD-approved HECM counselor.
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HECM counselors will discuss program eligibility requirements, financial consequences and alternatives to receiving a HECM and specifications for the home loan becoming due and payable. After the completion of HECM counseling, the homeowner will be able to make an independent, well informed decision of whether or not the product will meet their needs.
California home-owners who satisfy the eligibility requirements can complete a reverse mortgage application by getting in contact with a FHA-approved lending institution such as a bank, mortgage company, or savings and loan association.
Borrower Specifications In Order To Get A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your property and also have sizeable home equity
Reside in your home as a principal residence
Participation in a consumer information session offered by an approved 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 rating requirements will be required of the homeowner
No repayment as long as the property is the principal residence.
Loan Costs 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 condo properties
Manufactured houses on land
Meet FHA property guidelines and flood requirements
How the reverse mortgage lender} Program Works For California Homeowners
Home owners 62 and older which have repaid their house loans or have only small loan balances outstanding, and are also currently living in the property meet the requirements to take part in HUD’s reverse mortgage program.
The loan allows property owners to borrow from the equity in their homes. 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 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 circumstances change can restructure their payment options for a nominal fee of $20. Fees can vary based upon Loan company.
As opposed to standard home equity loans, a HUD reverse mortgage does not need repayment providing the property is the borrower’s principal residence. Loan companies recover their principal, plus interest, once the property is sold. The remainder of the value of the property would go to the homeowner or to his / her survivors. You can never owe in excess of your property’s appraised value.
If the sales funds are insufficient to cover the balance due, HUD pays off the lending company the sum of the deficiency. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all borrowers to provide this coverage. That is the wonderful thing about the HUD™ FHA guarantee.
The amount of money a homeowner can borrow is dependent upon how old they are, current interest rate, other loan charges and the appraisal of their property or FHA ‘s mortgage limits for their area, whichever is less. Usually, the more valuable your property is, the older that you are, the lower the interest, the more you can borrow.
There are no asset or income limitations on borrowers obtaining HUD’s reverse house loan.
There are also no restrictions on the value of homes qualifying for a HUD reverse mortgage. The value of the property is determined by an appraisal. Nevertheless, the amount that may 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 receive HECM mortgages. Homeowners are charged an upfront insurance premium that is 2% of the maximum claim amount which can be borrowed plus a .5 percent annual premium.