Reverse Mortgage Loans
Also known as HECM
A reverse mortgage is a mortgage loan product for homeowners age 62 or older who have accumulated home equity and want to use this to supplement retirement income.
With a reverse mortgage, the borrower receives payments from the lender and does not need to make payments back to the lender so long as he or she lives in the home and continues to fulfill his or her basic responsibilities, such as payment of taxes and insurance.
The loan balance grows over time as the borrower receives payments and interest accrues on the loan; home equity declines over time. Essentially, the mortgage works in the reverse direction of a forward mortgage, which is where the term “reverse” comes from. The reverse mortgage must be paid when the last surviving borrower sells the home, moves out permanently, or passes away.
Eligibility Requirements for HECM Purchase Loans
- The youngest titleholder must be 62 years or older
- The purchased home will be occupied within 60 days of closing
- The purchased home must be your primary residence
- You must meet financial eligibility criteria as established by HUD
- You may need to set aside additional funds from the loan proceeds to pay for taxes and insurance
- The difference between the purchase price of the home and the HECM proceeds will be paid in cash from the sale of an existing home or another source of eligible funds
- Single family homes
- Gift funds may be an acceptable form of down payment, however certain restrictions may apply
- If the homeowner is using cash, the cash must be seasoned for 60 days
- There must be proof that the homeowner has “eligible funds” from qualifying sources for the closing; depending on the source of funds, specific documentation may be required
- Additional underwriting requirements will vary by borrower situation