There are a few qualifications that must be met to be eligible for a reverse mortgage. They are:
Borrowers interested in a reverse mortgage may have a few basic questions:
Can I qualify for reverse mortgage?
Having a current mortgage on your home isn’t necessarily a problem. Your reverse mortgage would first be used to pay off the existing mortgage(s). Any remaining proceeds are then available with a variety of distribution options3. Many homeowners use a reverse mortgage for this purpose, freeing themselves from the burden of monthly mortgage payments. With a reverse mortgage from Watermark Capital, no monthly mortgage payments are required if you meet the terms of the loan—such as keeping current with property taxes, homeowners’ insurance, HOA dues, and home maintenance.
How Much Equity Do I Need?
The more equity you have in your home, the more likely it is that you can get cash from a reverse mortgage to supplement your retirement income, cover health care expenses, or whatever purpose you deem appropriate. As a general “rule of thumb,” your equity should be at least 50% of your home’s value. As home values have risen, many homeowners are finding they can qualify for a larger amount than in the past. Use our reverse mortgage calculator to see how much you could qualify to receive4. The amount you can borrow is a function of the value of your home, the age of the youngest borrower, and current interest rates.
What Types of Homes Qualify?
The most common types of homes that meet the reverse mortgage qualifications are single-family homes. However, multi-family homes (up to four units) can also qualify, as long as one of the four units serves as the borrower’s primary residence. Manufactured homes can qualify if they meet Federal Housing Administration (FHA) requirements. Condominiums can also qualify for a reverse mortgage, following specific guidelines from the Department of Housing and Urban Development (HUD).
What are the Financial Qualifications?
To qualify for a reverse mortgage, homeowners must be able to pay their own property taxes, homeowner’s insurance, and home maintenance. HOA fees, if applicable, will also need to be paid. Borrowers also cannot be delinquent on any federal debt. Lastly, you will need to complete a counseling session with a HUD-approved reverse mortgage counselor before completing your loan application.
Many homeowners ages 62+ opt for a Home Equity Conversion Mortgage (HECM) due to its less stringent credit requirements. Unlike traditional mortgages where eligibility is based solely on income and credit worthiness, reverse mortgage eligibility accounts for much more – including equity in the home. And since monthly payments are optional and not required on a reverse mortgage, having a high credit score is not as much of a determining factor. Learn more about reverse mortgage credit requirements here5.
In summary, qualifying for a reverse mortgage is more about your age and value of your home and ensuring that you have enough residual income to pay basic property charges and living expenses, as opposed to the much more rigorous requirements imposed by standard mortgages. Determining your eligibility is a quick and simple process that can be accomplished easily. Reach out to me and let’s have a conversation.
