Reverse mortgages (also known as Home Equity Conversion Mortgages, abbreviated to HECM) are helping older home owners in California gain additional economical security and enjoy their retirement years to the fullest.
The HECM FHA insured reverse mortgage could be used by senior home owners age 62 and older to transform the home equity inside their home to a monthly flow of additional cashflow and/or a credit line to be repaid when they do not inhabit the home.
The loan, commonly known as HECM, is funded by a mortgage company for example a mortgage lender, bank, credit union or savings and loan association. To support the homeowner in making a well informed decision of whether the program satisfies their needs, they’re required to get consumer education and counseling using a HUD-approved HECM counselor.
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HECM counselors will discuss program eligibility requirements, financial implications and alternatives to obtaining a HECM and provisions for the house loan becoming due and payable. After the completion of HECM counseling, the homeowner should be able to make an independent, informed decision of whether the product will meet their needs.
California home owners who satisfy the eligibility requirements can complete a reverse mortgage application by getting in contact with a FHA-approved lender such as a bank, mortgage company, or savings and loan association.
Borrower Criteria When Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your property and have substantial home equity
Reside in your home as a primary residence
Participation in a consumer information session provided by an approved HECM counselor
Mortgage Amount Based On:
Age for the youngest homeowner
Current interest rates
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit history requirements will be required of the applicant
No repayment provided the property 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 property
Meet FHA property specifications and flood requirements
How the jumbo reverse mortgage} Program Works For California Homeowners
Property owners 62 and older which have repaid their mortgages or have only small home loan balances outstanding, and are also presently residing in the home are eligible to take part in HUD’s reverse mortgage program.
The loan enables 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 situations change can restructure their payment selections for a nominal fee of $20. Fees may vary depending on Loan company.
In contrast to normal home equity loans, a HUD reverse mortgage doesn’t require repayment as long as the home is the borrower’s primary residence. Mortgage companies recover their principal, plus interest, once the home is sold. The remaining value of the home goes to the homeowner or to his or her heirs. You can never owe in excess of your home’s appraised value.
If the sales funds are inadequate to repay the amount owed, HUD will pay the financial institution the sum 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 beauty of the HUD™ FHA guarantee.
The total a homeowner could borrow is dependent upon what their age is, current interest rates, other loan fees and the appraised value of their home or FHA ‘s mortgage limits with their area, whichever is less. Generally, the more valuable your house is, the older you are, the lower the interest rate, the more you are able to borrow.
There isn’t any asset or cash flow limitations on borrowers obtaining HUD’s reverse home loan.
There’s also no restrictions on the value of houses being qualified for a HUD reverse mortgage. The value of the house will be determined by an appraisal. Nevertheless, the total 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 homeowners who receive HECM mortgages. Homeowners are charged an upfront insurance premium that is 2 percent of the maximum claim amount that could be borrowed along with a .5% annual premium.