(LoanSafe.org) — It is very well established that the Federal Housing Administration (FHA) has a reverse mortgage program known as the Home Equity Conversion Mortgage (HECM). Some people might be confused when they here this, because their knowledge may lead them to think that FHA backed mortgages are strictly for low income borrowers. While the FHA is an agency that does helps promote homeownership to people who don’t live as comfortably as others, they indeed do offer reverse mortgages.
Reverse mortgages are a specified type of refinancing for senior citizen homeowners who are 62 years old and older. Because it is a type of refinancing, it automatically involves tapping into the homes equity.
An FHA reverse mortgage may be a type of refinance loan that uses the equity of a home, but only senior citizen homeowners who use the property as their primary residence have access to this type of loan, because the principal of the loan technically does not have to be paid back. All of the other mandatory expenses that come with any other loan such as mortgage insurance, hazard insurance and property taxes must still be paid in order to keep the property, however once the homeowner(s) pass away, the home can be sold at a regular auction or taken over by an eligible heir with a brand new traditional mortgage after the reverse mortgage is paid off.
Reverse mortgages can be distributed to homeowners through:
– Lump payments
– Lines of credit
– Or one lump sum with the rest paid through periodic payments
These types of loans can be originated through private lenders as well, but an HECM offers its advantages.
While reverse mortgages can be ways for some seniors to just gain enough cash for more specific purposes, their overall function is indeed to aid in assisting seniors who are facing financial difficulties. One of these functions could be to pay off another existing mortgage, thus creating financial stability.
The process of the reverse mortgage is like most other loans as well. First there will be an application process. Applications for HECMs can be obtained at this HUD link. Further information can also be obtained by contacting a HUD approved lender. You will also have to contact a HUD Housing Counselor which is another requirement.
More information on other FHA loan programs can be found at this link.