Reverse mortgages (also referred to as Home Equity Conversion Mortgages, abbreviated to HECM) are aiding elderly people in California attain better personal financial stability 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 convert the equity inside their property into a monthly flow of extra cashflow and/or a credit line to be repaid once they no longer live in the property.
The loan, typically referred to as HECM, is funded from a loan company such as a mortgage lender, traditional bank, credit union or savings and loan association. To help the home-owner in making a knowledgeable determination of whether the program meets their requirements, they’re required to get consumer education and counseling from a HUD-approved HECM counselor.
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HECM counselors will discuss program qualification requirements, financial consequences and alternatives to receiving a HECM and provisions for the house loan becoming due and payable. After the completion of HECM counseling, the home-owner must be able to make an independent, informed determination of whether or not the product will satisfy their requirements.
California homeowners who satisfy the eligibility requirements can complete a reverse mortgage application by getting in touch with a FHA-approved lending institution such as a bank, loan company, or savings and loan association.
Borrower Standards When Getting A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your home and have sizeable equity
Live in your house as a primary residence
Taking part in a consumer information session offered by an approved HECM counselor
Mortgage Amount Based On:
Age for the youngest consumer
Current mortgage rate
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit rating qualifications will be required of the applicant
No repayment provided the property is the primary residence.
Mortgage Fees may be financed in the mortgage
Property Requirements:
Single family home or 1-4 unit home with one unit occupied by the homeowner
HUD-approved condo properties
Manufactured houses on property
Meet FHA property specifications and flood requirements
How the reverse mortgage} Program Works For California Homeowners
Home owners 62 and older that have paid in full their mortgages or have only small home loan amounts outstanding, and are presently residing in the property meet the criteria to take part in HUD’s reverse mortgage loan.
The loan permits homeowners to borrow from 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 credit line with monthly payments for as long as the borrower remains in the home.
Modified Term – combination of credit line with monthly payments 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 could differ depending on Financial institution.
Unlike regular home equity loans, a HUD reverse mortgage doesn’t require repayment provided that the property is the borrower’s primary residence. Financial institutions 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 their heirs. You can never owe more than your property’s appraisal value.
If the sales proceeds are not sufficient to repay the amount due, HUD pays 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. This is the wonderful thing about the HUD™ FHA guarantee.
The total amount a homeowner may borrow depends upon their age, the current interest rate, other loan fees and the appraisal of their property or FHA ‘s mortgage limits with their area, whichever is less. Generally, the more valuable your property is, the older that you are, the lower the interest rate, the more you’re able to borrow.
There isn’t any asset or cash flow limits on borrowers receiving HUD’s reverse loan.
In addition there are no restrictions on the value of houses getting qualified for a HUD reverse mortgage. The value of the property will be determined by an appraisal. Nonetheless, the total which can be borrowed comes from the lesser of the appraisal amount or FHA mortgage limit, which is $675,750.
HUD collects funds from insurance premiums charged to the homeowners who receive HECM mortgages. Homeowners are charged an upfront insurance premium which is 2 percent of the maximum claim amount which can be borrowed plus a .5% annual premium.