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2019 FHA Reverse Mortgage Guidelines, Simplified and Explained

Retirees over the age of 62 can take out a reverse mortgage on a house that they own. They don’t have to make monthly payments until they leave the house permanently through death or sale. Reach out to a financial advisor for more information on reverse mortgages.
Retirees over the age of 62 can take out a reverse mortgage on a house that they own. They don’t have to make monthly payments until they leave the house permanently through death or sale. Reach out to a financial advisor for more information on reverse mortgages.

Seniors have many ways to access to supplemental income after they retire - and some lie within the walls of your house. You can use the equity of your home to receive monthly payments through an FHA reverse mortgage.

Before you pursue this option, however, read the FHA reverse mortgage guidelines and determine if you qualify.

What Is An FHA Reverse Mortgage?

The Federal Housing Administration (FHA) allows retirees over the age of 62 to borrow against the equity of their house through a reverse mortgage.

This type of loan is also known as a Home Equity Conversion Mortgage (HECM.) Retirees can take out this money in a lump sum or use it as supplemental income and receive payments every month. The amount that is taken out is simply added to the current mortgage on the house.

Borrowers do not have to make monthly payments on this loan until they sell the house or move out. In the event that the borrower dies, their spouse, children, or beneficiaries will pay back the loan.

Not everyone can apply for an FHA reverse mortgage today. Know the rules before you consider taking out an FHA reverse mortgage.

Rules of FHA Reverse Mortgages

  • You must be 62 or older to take out an FHA reverse mortgage. If you want your spouse to co-sign the loan, they must be 62 or older or inherit your home after your death.
  • You must own your home and use it as a primary residence. However, you can take out a reverse mortgage to put a down payment on a vacation house.
  • FHA reverse mortgages are available to single-family homes and up to four-unit homes.
  • You must take a consumer counseling and education course before you get approved for your FHA reverse mortgage.

During the application process, lenders will assess your current financial situation before approving the reverse mortgage. If you want to cut down on costs during this process, you have the option of adding the closing costs into your reverse mortgage. (Remember, you don’t have to pay a cent of your reverse mortgage until you sell the home.)

When you sell your home, the loan will be paid off first and then you and your spouse will receive any remaining equity. If you or your spouse pass away while still owning the house, the final amount will be considered when your total assets are calculated.

How Much Can I Take Out of a Reverse Mortgage?

In 2019, the reverse mortgage lending limits increased to $726,525, but not all borrowers will be approved to take out that much money through a reverse mortgage. Lenders use the following factors to determine how much money a borrower can get through a reverse mortgage:

  • Appraised value of the home
  • Current interest rates
  • Age and marital status of the borrower

The appraised value of the home is the most important factor to consider. If your home is less than $726,525, you will only be able to take out a portion of the value.

If you want to buy a vacation home or take out a loan for any other reason, consider all of your options. There are many ways that retirees and other homeowners can borrow against the equity of their house, including HELOCs and home equity loans.

For more information on reverse mortgage guidelines, talk to an expert local real estate agent. They can help you weigh your financing options and answer any questions you may have.

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Andrew Schmeerbauch

Andrew Schmeerbauch is the Director of Marketing at Clever Real Estate, the free online service that connects you top agents to save on commission. His focus is educating home buyers and sellers on navigating the complex world of real estate with confidence and ease. Andrew has worked on projects for the United Nations and USC and has a particular passion for investing and finance. Andrew's writing has been featured in Mashvisor, L&T, Ideal REI, and Rentometer.

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