Eligibility

To be eligible for a HUD approved reverse mortgage the youngest homeowner must be 62 years old or older and have sufficient home equity.  A couple can still do a reverse mortgage even if one person is not yet 62.  For more details you should speak with your lender.

Besides age the major determining factor in qualifying for a reverse mortgage loan is having  sufficient home equity to cover the cost of the loan and any outstanding liens against the property.  For FHA backed / HUD approved loans the calculation takes into account:

• Current interest rate
• Whether the rate will be variable or fixed
• Age of the youngest homeowner
• FHA lending limits
• Appraised value of the home

The following list of things generally will not affect a borrowers eligibility for a reverse mortgage loan:

• Income
• Credit score
• Discharged bankruptcy
• Health of the homeowners

Here are several FAQ’s many borrowers ask:

• If a homeowner is not 62 but they are permanently disabled, can they qualify?
  • No. HUD approved reverse mortgages use age as the critical determining factor and currently there is no exception made for disabled people.
• Can someone qualify if they have a mortgage?
  • Yes. In fact the reason that many older Americans turn to a reverse mortgage is to payoff an existing first or second mortgage and eliminate those payments.
• Does every 62 year old automatically qualify?
  • No. Besides age a borrower must have have enough equity built up in their home to cover the loan fees and any liens against the home.  Liens that require payment include things such as first or second mortgages, tax liens, or any other creditor that has place a lien against the home. Additionally, some types of homes are not eligible.
• What happens if a borrower(s) don’t have enough home equity to qualify?
  • When a borrower(s) do not have enough home equity to at least cover the cost and any outstanding liens against the property they are considered to be in a “shortfall.”  Homeowners in shortfall situations have two options. The first is to pay down the balance on their mortgage by the amount of the shortfall so that they can qualify for the reverse mortgage. This is often not an option because most seniors who want a reverse mortgage and have a shortfall don’t have enough money to do this.
  • The second options is to apply for the reverse mortgage anyway and ask the reverse mortgage lender to help cover some of the fees.  Often larger national reverse mortgage lenders have funds they can use to offset certain fees associated with doing the loan.  The drawback here is that the borrower will need to go through the process of applying before knowing for sure if the lender will have the funds.  When applying for a reverse mortgage the borrower often pays upfront for the required reverse mortgage counseling and a deposit towards the cost of the appraisal.