Reverse Mortgage Borrower Qualifications
HECM (Home Equity Conversion Mortgage) reverse mortgages are a specialized home loan program for people who are at least 62 years old and own (or wish to purchase) their primary residence.
In addition to the minimum age requirement of 62, HECM borrowers must complete a counseling session with a HUD approved HECM Reverse Mortgage Counselor.
Borrowers on Title & 62 or Older
All HECM borrowers must be on title and be a minimum of 62 years of age. The property must be the primary residence of all borrowers. In addition, nobody can be on title that is not a HECM borrower.
Non-Borrowing Spouses (NBS)
who are less than 62 years of age, are allowed with HECM loans. The NBS can be on title, but will not be on the loan. NBS will have
life time tenure protection.
Changes to title after the loan has closed can trigger the loan due and payable.
HECM Reverse Mortgage Counseling
HECM program requirements mandate all borrowers and NBS receive counseling from a HUD approved 3rd party counselor. In some instances,
counseling may be required of some parties that are not borrowers or NBS.
There is a list of Local and National Counseling Agencies included in every quote package. If there are not any Local Agencies within reasonable driving distance from the borrowers, the National Agencies will provide counseling over the phone. There may be a charge of up to $150 for the counseling session.
The counseling process, from making the appointment to receiving the counseling certificate, normally takes 7-14 days.
HECM Income/Credit Qualifications
- Borrowers are allowed only one FHA insured loan. HECMs are FHA insured loans. If the borrowers have another FHA loan in place, it must be satisfied before they are eligible for a HECM loan.
- The borrowers' CAIVRS number must be clear. CAIVRS is a Federal government database of delinquent Federal debtors. If a borrower has any outstanding debt to, or guaranteed by the government, they are not eligible for a HECM FHA insured loan until their CAIVRS number has been cleared.
- For HECM purchases, a borrower cannot have had a foreclosure within the last three years.
- Cash to close for a HECM purchase must be sourced for
the previous 3 months. All funds must be the borrowers',
borrowed funds are not accepted. Gifts are allowed. Funds must also be sourced for
refinances that require cash to close.
- HUD's HECM Financial Assessment guidelines (credit/income underwriting) apply to all loans.
Property equity levels are often a problem for borrowers seeking a HECM refinance to payoff their current mortgage.
The proceeds from the HECM loan (or loan proceeds plus other borrower cash assets) must be adequate to retire all current liens (mortgages, HELOCs, etc.) against the property.
Insufficient equity to retire their current mortgage is the
single greatest reason current reverse mortgage inquirers fail
to secure a HECM loan.