Reverse mortgages (also known as Home Equity Conversion Mortgages, shortened to HECM) are helping elderly home owners in California reach an increased financial stability and enjoy their retirement living years to the fullest extent.
The HECM FHA insured reverse mortgage may be used by senior home owners age 62 and older to transform the equity in their property to a monthly stream of additional cash flow and/or a line of credit to be repaid when they cease to inhabit the property.
The home loan, commonly known as HECM, is funded from a lending institution for example a mortgage lender, traditional bank, credit union or savings and loan association. To assist the homeowner in making an educated determination of whether this program satisfies their requirements, they are required to get consumer education and counseling by a HUD-approved HECM counselor.
Other California Cities: Davis Mobile Estates, Royal Oak Manufactured Home Community, Rancho Yolo Mobile Home Park, El Macero, Swingle
HECM counselors will talk about program eligibility conditions, financial implications and alternatives to obtaining a HECM and specifications for the house loan becoming due and payable. Upon the completion of HECM counseling, the homeowner should be able to make an independent, well informed determination of whether or not the product will meet their requirements.
California home owners who fulfill the eligibility criteria can complete a reverse mortgage application by getting in touch with a FHA-approved lending institution like a bank, loan company, or savings and loan association.
Borrower Criteria To Get A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your home as well as have sizeable equity
Occupy your house as a primary residence
Taking part in a consumer information session offered by an approved HECM counselor
Mortgage Amount Based On:
Age of the youngest borrower
Current interest rates
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit history requirements will be required of the applicant
No repayment provided the home is the primary residence.
Loan Costs may be financed in the mortgage
Real Estate Requirements:
Single family home or 1-4 unit home with one unit occupied by the homeowner
HUD-approved condominiums
Manufactured homes on property
Meet FHA property conditions and flood requirements
How a reverse mortgage loan} Program Works For California Homeowners
Property owners 62 and older that have paid in full their mortgages or have only small loan balances outstanding, and are also presently residing in the property are eligible to participate in HUD’s reverse mortgage loan.
The loan permits home-owners to borrow on the equity in their properties. Homeowners can choose 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 line of credit with monthly payments for as long as the borrower remains in the home.
Modified Term – combination of line of credit with monthly payments 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 depending on Lender.
Unlike regular home equity loans, a HUD reverse mortgage does not require repayment so long as the property is the borrower’s principal residence. Mortgage lenders recover their principal, plus interest, once the property is sold. The remainder of the value of the property goes to the homeowner or to his / her heirs. You’re never going to owe more than your property’s appraisal value.
If the sales proceeds are insufficient to repay the total amount owed, HUD pays the lender the amount of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the borrowers to supply this coverage. This is the great thing about the HUD™ FHA guarantee.
The total a homeowner could borrow is dependent upon their age, the current interest rates, other loan charges and the appraisal vlaue of their property or FHA ‘s mortgage limits with their area, whichever is less. Usually, the more valuable your house is, the older that you are, the lower the interest rate, the more you are able to borrow.
There aren’t any asset or cash flow limitations on borrowers obtaining HUD’s reverse mortgage.
Additionally, there are no limitations on the value of properties getting qualified for a HUD reverse mortgage. The value of the house is determined by an appraisal. However, the 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 home-owners who receive HECM mortgages. Homeowners are charged an upfront insurance premium which is 2% of the maximum claim amount that could be borrowed plus a .5 percent annual premium.