FHA Reverse Mortgages

For homeowners interested in a home equity loan, FHA reverse mortgages should be considered. A home equity loan provides a large lump sum of money based on the amount of equity in the home, which is basically how much the homeowner has paid on the mortgage. Typically, home equity loans can only be approved for up to 80 percent of the equity amount. They are often used for big-ticket expenses like paying for college, a wedding, doing home renovations or even taking an expensive vacation. If you don't need a large lump sum of money at once but do want to tap into your home's equity, then a reverse mortgage might be ideal for you.

Many senior citizens find it beneficial to use FHA reverse mortgages depending on their financial situation. FHA stands for Federal Housing Administration and this administration has a program especially for seniors who want a reverse mortgage loan. There is one reverse mortgage only available through FHA approved lenders called the Home Equity Conversion Mortgage, abbreviated HECM. This loan program gives qualifying borrowers the ability to access a fixed amount each month, a line of credit, or both.

Home Equity Conversion Mortgage loans can be used to purchase a home that is to be a primary residence, that is if you have the money to pay the difference between the loan and the mortgage price including closing costs. If you are interested in one of these loans for any purpose, speak to a counselor who can educate you on requirements and even alternatives that may be available. After speaking with a HECM counselor you will have more information about this type of loan and if it is right for you. If you are seeking FHA reverse mortgages, this is the only one available.

Borrowers must be 62 or older, have a small remaining balance on their mortgage or have full ownership of the property which must be their primary residence. Borrowers can not owe any delinquent federal debt. The amount of money you are able to get on a reverse mortgage depends on age, property interest rate and financial criteria. Borrowers are not required to show proof of income or employment. The property must meet FHA standards and requirements as mandated by law.

There are five payment plans from which borrowers can select with this type of FHA reverse mortgage. One is called a tenure, which means you pay equal monthly payments for a lifetime. A term plan is comprised of equal monthly payments set for a certain number of months. A line of credit allows repayment to be made on an unscheduled basis as the borrower wishes until the credit has been depleted. A modified tenure and modified term are loan types where the borrower also gets a line of credit.

If you decide you want to change the payment options on your FHA reverse mortgage you can do so for a $20 fee. Another way that a HECM loan is different from other equity loans is that there is no repayment. This is as long as the home remains your primary residence and mortgage obligations are met. When the home is sold, the lenders recover their money including interest, while the remainder of the home's value goes to your beneficiaries.

When searching for FHA reverse mortgages, now you know that your only option is the HECM loan. There are other reverse mortgage loans available that aren't just for senior citizens, but they are not insured by the FHA. If you meet the qualifications it is not a bad idea to go with a reverse mortgage from the FHA rather than another lender because these loans are regulated by the government and as trustworthy as you will find.