Reverse mortgages (often called Home Equity Conversion Mortgages, shortened to HECM) are aiding older people in California obtain an increased monetary security and enjoy their retirement years to the fullest extent.
The HECM FHA insured reverse mortgage may be used by senior homeowners age Sixty two and older to convert the home equity in their house into a monthly stream of extra cash flow and/or a line of credit to be paid back once they cease to occupy the house.
The loan, commonly known as HECM, is funded by a loan company like a mortgage lender, bank, credit union or savings and loan association. To support the homeowner in making an informed determination of whether this program meets their requirements, they’re required to receive consumer education and counseling using a HUD-approved HECM counselor.
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HECM counselors will talk about program eligibility requirements, financial consequences and alternatives to receiving a HECM and specifications for the mortgage loan becoming due and payable. After the completion of HECM counseling, the homeowner must be able to make an independent, educated determination of whether or not the product will meet their requirements.
California homeowners who fulfill the eligibility criteria can complete a reverse mortgage application by contacting a FHA-approved lending institution such as a bank, loan company, or savings and loan association.
Borrower Criteria For Getting A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your property as well as have considerable home equity
Live in your home as a primary residence
Taking part in a consumer information session provided by an approved HECM counselor
Mortgage Amount Based On:
Age for the youngest homeowner
Current mortgage rate
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit rating qualifications are required of the applicant
No repayment so long as the house is the primary residence.
Loan Costs may be financed in the mortgage
Property Requirements:
Single family house or 1-4 unit house with one unit lived in by the homeowner
HUD-approved condo properties
Manufactured houses on land
Meet FHA property conditions and flood requirements
How the reverse mortgage lenders} Program Works For California Homeowners
Home owners 62 and older who have paid back their home loans or have only small mortgage balances outstanding, and are currently living in the house meet the requirements to take part in HUD’s reverse mortgage loan.
The loan enables property owners to borrow against the equity in their properties. 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 line of credit with monthly installments for as long as the borrower remains in the home.
Modified Term – combination of line of credit with monthly installments for a fixed period of months selected by the borrower.
Homeowners whose conditions change can restructure their payment selections for a nominal fee of $20. Fees may vary dependent on Loan provider.
As opposed to normal home equity loans, a HUD reverse mortgage does not need repayment so long as the house is the borrower’s primary residence. Mortgage lenders regain their principal, plus interest, once the house is sold. The rest of the value of the house goes to the homeowner or to his / her survivors. You can’t ever owe above your house’s appraisal value.
If the sales funds are not enough to repay the total due, HUD will pay the lending company the sum of the shortfall. 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 of money a homeowner could borrow depends upon how old they are, current interest rates, other loan fees and the appraisal vlaue of their house or FHA ‘s mortgage limits with their area, whichever is less. Typically, the more valuable your home is, the older that you are, the lower the interest, the more you could borrow.
There isn’t any asset or cash flow limitations on borrowers obtaining HUD’s reverse loan.
There’s also no limitations on the value of properties qualifying for a HUD reverse mortgage. The value of the home is determined by an appraisal. Nonetheless, the total amount that may 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 property owners who get HECM mortgages. Homeowners are charged an upfront insurance premium which is 2 percent of the maximum claim amount that may be borrowed as well as a .5% annual premium.