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Did You Know?
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SUBSCRIBE
to the Single Family Housing email list. You will get
frequent updates to the HOC Reference Guide, training
and event announcements, mortgagee letters, FHA Mortgage
limits, and notices about your Single Family HECM business.
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About
the HECM Program:
The HECM FHA insured reverse mortgage can be used by senior homeowners
age 62 and older to convert the equity in their home into monthly
streams of income and/or a line of credit to be repaid when they
no longer occupy the home. The loan, commonly known as HECM, is
funded by a lending institution such as a mortgage lender, bank,
credit union or savings and loan association. To assist the homeowner
in making an informed decision of whether this program meets their
needs, they are required to receive consumer education and counseling
by a HUD-approved HECM
counselor.
HECM
counselors will discuss program eligibility requirements, financial
implications and alternatives to obtaining a HECM and provisions
for the mortgage becoming due and payable. Upon the completion of
HECM counseling, the homeowner should be able to make an independent,
informed decision of whether this product will meet their needs.
You can also use this handy Reverse
Mortgage Calculator to help you see if you qualify.
Homeowners
who meet the eligibility criteria can complete a reverse mortgage
application by contacting a FHA-approved lending institution such
as a bank, mortgage company, or savings and loan association. If
you need assistance locating a FHA-approved lender, you can request
a listing of FHA-approved lenders from the HECM counselor or use
HUD's searchable listing.
Borrower
Requirements:
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Age
62 years of age or older
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Own
your property
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Occupy
your property as primary residence
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Participation
in a consumer information session given by an approved HECM
counselor
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Mortgage
Amount Based On:
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Age
of the youngest borrower
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Current
interest rate
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Lesser
of appraised value or the FHA insurance limit
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Financial
Requirements:
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No
income or credit qualifications are required of the borrower
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No
repayment as long as the property is the primary residence
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Closing
costs may be financed in the mortgage
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Property
Requirements:
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Single
family home or 1-4 unit home with one unit occupied by the borrower
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HUD-approved
condominiums
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Manufactured
homes and leased land
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Meet
FHA property standards and flood requirements
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How
the Home Equity Conversion Mortgage Program Works:
Homeowners
62 and older who have paid off their mortgages or have only small
mortgage balances remaining, and are currently living in the home
are eligible to participate in HUD's reverse mortgage program. The
program allows homeowners to borrow against the equity in their homes.
Homeowners can select 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.
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Term - equal monthly payments for a fixed period of months selected.
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Line of Credit - unscheduled payments or in installments, at times
and in amount of borrower's choosing until the line of credit
is exhausted.
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Modified Tenure - combination of line of credit with monthly payments
for as long as the borrower remains in the home.
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Modified Term - combination of line of credit 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.
Unlike ordinary home equity loans, a HUD reverse mortgage does not
require repayment as long as the home is the borrower's principal
residence. Lenders recover their principal, plus interest, when
the home is sold. The remaining value of the home goes to the homeowner
or to his or her survivors. You can never owe more than your home's
value.
If the sales proceeds are insufficient to pay the amount owed, HUD
will pay the lender the amount of the shortfall. HUD's Federal Housing
Administration (FHA) collects an insurance premium from all borrowers
to provide this coverage.
The amount a homeowner can borrow depends on their age, the current
interest rate, other loan fees and the appraised value of their
home or FHA 's mortgage limits for their area, whichever is less.
Generally, the more valuable your home is, the older you are, the
lower the interest, the more you can borrow.
For example, based on a loan with an interest rates of approximately
9 percent, and a home qualifying for $100,000, a 65-year-old could
borrow up to 22 percent of the home's value; a 75-year-old could
borrow up to 41 percent of the home's value; and, an 85-year-old
could borrow up to 58 percent of the home's value. The percentages
do not include closing costs because these charges can vary.
There are no asset or income limitations on borrowers receiving
HUD's reverse mortgages.
There are also no limits on the value of homes qualifying for a
HUD reverse mortgage. The value of the home will be determined by
an appraisal. However, the amount that may be borrowed is derived
from the lower of the appraisal amount or FHA mortgage limit for
the area, which varies from $200,160 to $362,790. For Alaska, Guam,
Hawaii and the Virgin Islands, the FHA mortgage limits may be adjusted
up to 150 percent of the ceiling depending on the area. The FHA
limits usually increase each year. As a result, owners of higher-priced
homes can't borrow any more than owners of homes valued at the FHA
limit.
HUD's
reverse mortgage program collects funds from insurance premiums
charged to the homeowners. Homeowners are charged an upfront insurance
premium which is 2 percent of the maximum claim amount that may
be borrowed plus a .5 percent annual premium.
Technical
Guidance:
This
program is authorized by the Housing and Community Development Act
of 1987, Section 417, Public law 100-242 (12 U.S.C. 1715z-20). Program
regulations are in 24 CFR 206. This program is administered by the
Office of Single Family Program Development in HUD's Office of Housing-Federal
Housing Administration.
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