Reverse mortgages (known as Home Equity Conversion Mortgages, abbreviated to HECM) are assisting older people in California obtain better financial stability and enjoy their retirement 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 home equity inside their house to a monthly stream of additional cash flow and/or a line of credit to be paid back once they no longer live in the house.
The loan, typically referred to as HECM, is funded by a lender like a mortgage lender, traditional bank, credit union or savings and loan association. To help the homeowner in making an informed determination of whether this program meets their needs, they’re required to receive consumer education and counseling using a HUD-approved HECM counselor.
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HECM counselors will discuss program qualification requirements, financial implications and alternatives to receiving a HECM and provisions 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 the product will fulfill their needs.
California homeowners who fulfill the eligibility requirements 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 For Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your property and have significant home equity
Occupy your property as a primary residence
Taking part in a consumer information session given by an authorized HECM counselor
Mortgage Amount Based On:
Age of the youngest consumer
Current interest rate
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit qualifications are required of the applicant
No repayment as long as 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 occupied by the homeowner
HUD-approved condo properties
Manufactured houses on property
Meet FHA property conditions and flood requirements
How the reverse mortgage loans} Program Works For California Homeowners
Property owners 62 and older which have paid off their mortgages or have only small home loan amounts outstanding, and are presently residing in the house meet the criteria to participate in HUD’s reverse mortgage loan.
The loan enables property owners to borrow against the equity in their houses. 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 situations change can restructure their payment selections for a nominal fee of $20. Fees could differ dependent on Lender.
In contrast to standard home equity loans, a HUD reverse mortgage does not need repayment providing the house is the borrower’s primary residence. Lenders recover their principal, plus interest, once the house is sold. The remaining value of the house goes to the homeowner or to her or his survivors. You can’t ever owe in excess of your house’s appraisal value.
If the sales proceeds are inadequate to cover the amount owed, HUD pays off the lending company the sum of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the borrowers to provide this coverage. That is the great thing about the HUD™ FHA guarantee.
The amount of money a homeowner can borrow is dependent upon what their age is, current interest rate, other loan fees and the appraisal vlaue of their house or FHA ‘s mortgage limits with their area, whichever is less. Normally, the more valuable your home is, the older you are, the lower the rate, the more you’re able to borrow.
There isn’t any asset or cash flow restrictions on borrowers receiving HUD’s reverse home loan.
There are no restrictions on the value of houses qualifying for a HUD reverse mortgage. The value of the home is determined by an appraisal. Nonetheless, 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 obtain HECM mortgages. Homeowners are charged an upfront insurance premium that is 2% of the maximum claim amount that may be borrowed along with a .5% annual premium.