Reverse mortgages (also referred to as Home Equity Conversion Mortgages, abbreviated to HECM) are helping elderly home owners in California attain improved financial stability and enjoy their retirement living years to the fullest extent.
The HECM FHA insured reverse mortgage may be used by senior home owners age Sixty two and older to transform the equity inside their property to a monthly flow of extra cash flow and/or a credit line to be repaid when they cease to occupy the property.
The mortgage, typically referred to as HECM, is funded from a loan company like a mortgage lender, traditional bank, credit union or savings and loan association. To support the home-owner in making a knowledgeable decision of if the program fulfills their requirements, they’re required to receive consumer education and counseling from a HUD-approved HECM counselor.
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HECM counselors will talk about program eligibility conditions, financial implications and alternatives to getting a HECM and specifications for the mortgage becoming due and payable. After the completion of HECM counseling, the home-owner must be able to make an independent, informed decision of whether this product will meet their requirements.
California home owners who fulfill the eligibility requirements can complete a reverse mortgage application by contacting a FHA-approved lender like a bank, mortgage company, or savings and loan association.
Borrower Requirements To Get A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your home and also have substantial equity
Reside in your house as a principal residence
Participation in a consumer information session offered by an approved HECM counselor
Mortgage Amount Based On:
Age of the youngest homeowner
Current interest rate
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit rating requirements will be required of the borrower
No repayment so long as the home is the principal residence.
Costs 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 condos
Manufactured houses on property
Meet FHA property guidelines and flood requirements
How the jumbo reverse mortgage} Program Works For California Homeowners
Home owners 62 and older that have paid in full their home loans or have only small mortgage balances outstanding, and are currently residing in the property meet the requirements to take part in HUD’s reverse mortgage loan.
The loan permits home-owners to borrow on the equity in their properties. 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 options for a nominal fee of $20. Fees could differ depending on Lender.
Unlike standard home equity loans, a HUD reverse mortgage does not require repayment as long as the property is the borrower’s primary residence. Financial institutions recover their principal, plus interest, when the property is sold. The remainder of the value of the property would go to the homeowner or to his / her survivors. You’re never going to owe more than your property’s appraisal value.
If the sales proceeds are inadequate to repay the balance payable, HUD pays off the lender the sum of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all homeowners to supply this coverage. That is the beauty of the HUD™ FHA guarantee.
The total a homeowner can borrow is determined by how old they are, current interest rate, other loan charges and the appraised value of their property or FHA ‘s mortgage limits with their area, whichever is less. Usually, the more valuable your house is, the older that you are, the lower the interest, the more you’re able to borrow.
There aren’t any asset or income limits on homeowners obtaining HUD’s reverse home loan.
There are also no restrictions on the value of properties being qualified for a HUD reverse mortgage. The value of the house will be determined by an appraisal. Nevertheless, the total that could 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 home-owners who receive HECM mortgages. Homeowners are charged an upfront insurance premium that is 2% of the maximum claim amount which can be borrowed and then a .5 percent annual premium.