Reverse mortgages (also referred to as Home Equity Conversion Mortgages, abbreviated to HECM) are helping elderly people in California attain additional monetary stability and enjoy their retirement living years to the fullest extent.
The HECM FHA insured reverse mortgage could be used by senior home owners age 62 and older to convert the equity in their home to a monthly stream of extra cash flow and/or a credit line to be paid back after they no longer inhabit the home.
The home loan, often called HECM, is funded from a lending institution such as a mortgage lender, bank, credit union or savings and loan association. To help the home owner in making a knowledgeable determination of whether this program satisfies their needs, they are required to get consumer education and counseling from a HUD-approved HECM counselor.
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HECM counselors will talk about program qualification requirements, financial consequences and alternatives to receiving a HECM and specifications for the mortgage becoming due and payable. After the completion of HECM counseling, the home owner should be able to make an independent, informed determination of whether or not this product will meet their needs.
California homeowners who satisfy the eligibility criteria can complete a reverse mortgage application by speaking to a FHA-approved lender like a bank, loan company, or savings and loan association.
Borrower Specifications When Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your home as well as have significant equity
Reside in your home as a primary residence
Participation in a consumer information session offered by an authorized HECM counselor
Mortgage Amount Based On:
Age of the youngest applicant
Current interest rates
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit history qualifications will be required of the applicant
No repayment providing the home is the primary residence.
Closing costs may be financed in the mortgage
Real Estate Requirements:
Single family home or 1-4 unit home with one unit occupied by the borrower
HUD-approved condominiums
Manufactured houses on land
Meet FHA property standards and flood requirements
How a reverse mortgage specialist in California} Program Works For California Homeowners
Property owners 62 and older which have paid back their house loans or have only small loan amounts outstanding, and are also currently living in the home meet the requirements to participate in HUD’s reverse mortgage loan.
The loan allows property owners to borrow from the equity in their homes. 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 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 situations change can restructure their payment selections for a nominal fee of $20. Fees may vary dependant upon Loan company.
Contrary to normal home equity loans, a HUD reverse mortgage does not need repayment provided that the home is the borrower’s primary residence. Lenders regain their principal, plus interest, when the home is sold. The rest of the value of the home would go to the homeowner or to his / her survivors. You can’t ever owe above your home’s appraised value.
If the sales funds are not sufficient to pay the amount payable, HUD will pay the lender the amount of the deficiency. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all borrowers to supply this coverage. That is the wonderful thing about the HUD™ FHA guarantee.
The amount a homeowner may borrow is dependent on their age, the current interest rate, other loan charges and the appraisal vlaue of their home 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 rate, the more you could borrow.
There are no asset or cash flow restrictions on borrowers obtaining HUD’s reverse home loan.
There are also no restrictions on the value of homes getting qualified for a HUD reverse mortgage. The value of the property is determined by an appraisal. Nonetheless, the 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 that could be borrowed and then a .5 percent annual premium.