A HECM reverse mortgage is an FHA insured loan specifically designed for homeowner’s age 62 and above, that allows you to convert a portion of the value
of your home into tax free money, without having to sell their home, give up title or obligate yourself to a monthly mortgage payment. HECM stands
for Home Equity Conversion Mortgage and it is the name of the FHA reverse mortgage program.
Reverse mortgages allow you to pull out a portion of your equity in any one of four ways:
- As a lump sum (Take all the money at once – HUD does have limits to this option)
- In the form of monthly payments (the lender deposits a set amount into your account monthly)
- As a Line of Credit (similar to a typical home equity line of credit)
- Any combination of the above
How To Qualify For A Reverse Mortgage
One of the first things you need to know about reverse mortgages is that you do need to be at least 62 years old to get one. If you are married,
only one of you needs to be 62, but the lender will use the youngest person’s age to determine the amount that you can borrow. The older you
are, the more money you can qualify for.
The home must be your primary residence. You cannot get a reverse mortgage on a 2nd home or a rental. The home also needs to qualify under
HUD guidelines, so while it can have some deferred maintenance or need repairs, it cannot be dilapidated. Also, HUD only allows lenders to originate
reverse mortgages on certain types of properties:
- Single Family Homes
- Condos (Must be FHA Approved)
- 2-4 Unit Properties (As long as you live in one unit as your primary residence)
- Mobile Homes (1976 and newer on a permanent foundation on land that you own)
Beginning on April 27, 2015 all HECM borrowers must qualify for a reverse mortgage by showing a “willingness and capacity to timely meet his or her financial
obligations and to comply with the mortgage requirements.” Willingness means the lender will have to verify your credit history and capacity
means that you must show proof of verifiable Income.
The lender does not use credit scores or exact debt-to-income ratios, but you need to show that you have paid your property charges (mortgage payments,
property taxes, homeowners insurance and any HOA dues), in a timely manner as well as prove that you have enough income to meet all of your financial
If you’d like to learn more, please inquire about a reverse mortgage in Colorado from someone who specializes in reverse mortgages.