FHA Reverse Mortgages Explained

 

If you are looking for information about FHA reverse mortgages then you'll want to read this article. Specifically, I will talk about who they are for, the requirements of the FHA, and the advantages associated with getting an FHA reverse mortgage loan.

FHA stands for Federal Housing Administration, which is a branch within the United States Department of Housing and Urban Development (HUD). In order to qualify for a reverse mortgage loan the FHA requires the homeowner to be at least 62 years of age, or older.

FHA also provides reverse mortgage insurance which makes the loan program less expensive for the borrowers then similar reverse mortgage programs offered by private lenders and smaller institutions.

The only other requirement the FHA ask of you, other than being 62 years of age or older, is that you have equity in your home and little debt or mortgage against it. There is no other restriction, required credit rating, level of income or any other assets needed.

If you are approved for an FHA reverse mortgage loan you can receive your loan in one of three options. You can take it all in one lump payment, in monthly installments for a fixed term, or indefinite term as a line of credit against the loan.

An FHA loan is paid off either when the homeowner passes away, moves out of the home, or sells the property. Then, HUD collects the proceeds from the sales. If those proceeds exceed the loan, then the difference is either awarded to the homeowner, if he is alive, or to the homeowner's heirs. If the proceeds do not cover the amount of the loan, then HUD covers the difference.

The main benefit of a reverse mortgage loan is that the homeowner is not required to make monthly payments against the loan. That is why they call it a reverse mortgage -- because instead of you having to make payments each month, the leading institution is making payments to you -- whether monthly, in one lump sum, or when you use it as a line of credit.

The way the amount of the loan is calculated has to do with the value of your home, the interest rates, the location of your home, as well as your age.

When you're awarded an FHA reverse mortgage loan you can spend it however you see fit. The only requirement is that you first pay off the mortgage against your home, if there is one currently.