HUD Requirements for A Reverse Mortgage

Reverse mortgages have been around for quite some time in the United States. The loan itself however is not available to all homeowners. There are certain HUD (U.S. Department of Housing and Urban Development) requirements for qualifying for a reverse mortgage. The first is that you must be at least 62 years old, meaning that this type of loan is only for seniors. Second, the homeowner must participate in a counseling session with an approved nonprofit counseling agency. This credit counseling class is designed educate the homeowner about the terms and conditions of the loan. Third, they must have positive equity in your home, meaning that they cannot owe more money on the home than it is worth. Finally any existing liens on the home, for example a HELOC or home equity loan, will have to be paid in full at the closing of the new loan.

    All reverse mortgage loans are federally insured, and the federal regulations require that you complete a reverse mortgage counseling course from a government approved agency.

    What is a Reverse Mortgage

    A reverse mortgage or Home Equity Conversion Mortgage allows seniors in the U.S. to turn their home’s equity into cash that is available for their discretion. However with a reverse mortgage debt actually increases over time instead of decreasing like a normal home loan. One of the benefits of this type of loan is that there are no monthly payments required and nothing has to be paid back until you sell the home, die, or no longer use it as your principal residence.

    You cannot be out of your home for more than 364 consecutive days otherwise you will violate the terms of the loan. Also, you need to continue paying property tax every year. If you do those two things and keep your home well maintained you'll be able to live in your home with no payments. In a reverse mortgage you can take your loan in monthly payments, as a line of credit, or in a lump sum.

    Reverse Mortgage Counseling

    Similar to bankruptcy counseling which is required before a debtor may file, with a reverse mortgage a person will need to complete a reverse mortgage counseling course before they can qualify. Government approved courses are provided where you work one-on-one with a trained counselor who will help you understand a reverse mortgage and how it can affect you. They will assess your situation and go over all of your financial options with you.

    In a reverse mortgage counseling class you will also discuss several payment options. The counselor will go over the financial and tax implications with you, and as well explain the interest rates and costs in great detail. Once the counseling course has been completed you will be issued the certificate of completion that needs to be filed with your lender at closing. Most government approved nonprofit agencies that offer credit counseling will also offer the reverse mortgage counseling that you need in order to qualify for your reverse mortgage.
    Micah Castro is a freelance writer for Alliance Credit Counseling, which offers reverse mortgage counseling class, along with credit and bankruptcy counseling.