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Reverse Mortgages

Posted by Predovich & Company

A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into case. The equity that built up over years of home mortgage payments can be paid to you.  But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence.  The Federal Housing Administration's (FHA) Home Equity Conversion Mortgage (HECM) provides these benefits.  You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan, and you must live in the home.  You are further required to receive consumer information from an approved HECM counselor prior to obtaining the loan.  Your home must be a single family home or a 1-4 unit home with one unit occupied by the borrower.  HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.

Source: U.S. Department of Housing and Urban Development at www.hud.gov 5/26/09

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