Many retirees who plan to stay in their homes long-term often think about reverse mortgages as a good option. But before you can take out a reverse mortgage, your home needs to meet certain eligibility requirements, which might involve some modifications to suit the changing needs of older residents.
Most reverse mortgages today are called Home Equity Conversion Mortgages (HECMs) and are insured by the Federal Housing Administration (FHA), part of the Department of Housing and Urban Development (HUD). Only homeowners who are 62 or older can get a reverse mortgage, which lets them convert part of their home equity into a loan they can use for any purpose. Unlike regular mortgages, the loan balance for a reverse mortgage increases over time.
One key thing with reverse mortgages is that you don’t have to make monthly payments. The loan amount is repaid when the borrower either passes away or permanently moves out of the house.
Since most reverse mortgages are federally backed, the properties must meet certain standards to qualify for HECMs.
So, what are the property requirements?
1. **Building Codes**: For FHA approval, your home must comply with one of the recognized national building codes or a local/state building code based on a national standard.
2. **Home Utilities**: There’s no specific longevity requirement for features like doors, windows, and kitchen cabinets, but HUD has minimum standards to maintain the value of the home.
3. **Safety**: The property must be free from any hazards that could harm the residents or affect the structural integrity of the house.
**Getting Your Home FHA-Approved**
To get a reverse mortgage, your home must meet FHA/HUD building standards and pass an inspection before the loan can be finalized. Some homes may need significant work to meet these standards, but companies like Fidelity Homestead Associates can help with repairs and renovations.
**Eligible Properties for HECMs**:
– Single-family homes
– 1-4 unit homes with one unit occupied by the borrower
– HUD-approved condominium projects
– Manufactured homes that meet FHA standards
– New homes with a certificate of occupancy and fully completed for the owner to live in
**Ineligible Properties for HECMs**:
– Housing cooperative units
– Boarding houses
– Bed and breakfast establishments
– Certain manufactured homes built after 1976
For more information on property eligibility for reverse mortgages, you can visit HUD.gov or talk to a financial advisor.