Have you wondered, what may be the unique feature of the FHA reverse mortgage? Have you ever thought, what are the financial risks concerning the reverse mortgage? How can you be 100 procent sure about the security?
FHA reverse mortgage, like all reverse loans, is a long term commitment. That means, that when once taken, a senior borrower must be sure the lender will pay everything along the instructions a senior has given. But because even banks can become bankrupt, how a senior can guarantee that he will not suffer?
When FHA reverse mortgage is a Government insured program, the Government will guarantee in all circumstances, that the borrower will get, what has been agreed. The FHA reverse mortgage loan agreement includes a so called mortgage insurance, which will cover the missing part of the back payment, if the home selling price cannot do that.
1. Who Can Qualify?
FHA reverse mortgage qualification is simple. Every American age 62 or over, who own his or her permanent home, where he has equity left, will qualify. The qualification does not require any income nor credit information.
In a way the Government has transferred a part of the social security payments to the seniors. The seniors will use the money, which they have saved through many years, when paying their mortgages. Now they release that money in the form of a special loan. Usually the payments are tax free.
2. How Much A Senior Can Get?
The maximum amount depends on the age of the borrower, on the appraised value of the home and on the interest rate level. Roughly speaking we can say, that the older the borrower, the lower the interest rates and the higher the home value, the more the borrower will get. The maximum amount varies between $ 200.160 and $ 362.790.
3. What Home Types Are Eligible?
The following home types are eligible. The townhouses, detached homes, two to four unit properties, single family dwellings and condominiums, which are approved by FHA. FHA does not accept the trailer homes, the holiday homes or the commercial properties.
4. FHA Insured Reverse Mortgage Has Higher Upfront Costs.
A borrower has to pay 2 % to the property value as a Mortgage Insurance Premium and 0,5 % Annual Premium. The Insurance Premium will be included into the final payment, but the Annual Premium will be deducted from the payments a borrower will get. So the Mortgage Premium will increase the total debt amount and will grow every year.
5. A Borrower Has To Work With A Counselor.
FHA insists, that a borrower meets the reverse mortgage counselor. This meeting, and also talks after that, is important. A borrower must think in advance the questions and the future financial plans to get enough useful information.
The counselor does not sell anything, he is an independent expert, but a senior can get useful tips about the lenders and also about the alternatives. It is also wise to talk with other seniors and to read writings from the Internet. A wise senior talks also with the heirs and makes sure their attitude supports the solution.