Are you considering an FHA reverse mortgage loan on your home? While there are many advantages to these types of loans, there are also some things you must know before moving forward with this loan.
FHA stands for the Federal Housing Administration, which is a branch within the United States Department of Housing and Urban Development (HUD). In order to qualify for this mortgage program, their are certain requirements the FHA has set. One of those is that the homeowner must be at least 62 years of age, or older. The FHA also provides insurance which makes the loan program less expensive for the borrowers then similar reverse mortgage programs offered by private lenders and smaller institutions.
The only other requirement the FHA question of you, other than being 62 years of age or older, is that you have equity in your home and small debt or mortgage against it. There is no other restrictions, required credit ratings, level of income or any other assets needed. If you are approved for an FHA reverse mortgage loan you can receive your loan in one of three options. You can take it all in one lump payment, in monthly installments for a fixed term, or indefinite term as a line of credit against the loan.
An FHA loan is paid off either when the homeowner passes away, moves out of the home, or sells the property. Then, HUD collects the proceeds from the sales. If those proceeds exceed the loan, then the difference is either awarded to the homeowner, if he is alive, or to the homeowner’s heirs. If the proceeds do not cover the amount of the loan, then HUD covers the difference.
The main benefit of these loans are that the homeowner is not required to make monthly payments against the loan. That is why they call it a reverse mortgage — because instead of you having to make payments each month, the leading institution is making payments to you — whether monthly, in one lump sum, or when you use it as a line of credit.
The way the amount of the loan is calculated has to do with the value of your home, the interest rates, the location of your home, as well as your age. These are some of major aspects of an FHA reverse mortgage to keep in mind.
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If you are currently considering about buying a house or home refinance but your credit score is less than perfect, or if you are either wants to buy a home but haven’t established traditional credit or currently have an ARM loan that is due to reset but have tattered credit, do not worry. There is the federal government’s FHA Loan that has simpler qualifications to meet (rather than conventional loan), so you and your less-than-perfect credit score may be the cure for your troubled heart.
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