Looking to the Federal Government for Your Reverse Mortgage
A Home Buying Article Contributed by Robert Scalia
Looking to the Federal Government for Your Reverse Mortgage
When it comes to a reverse mortgage, it's important to keep in mind that The Home Equity Conversion Mortgage (HECM) is the only reverse mortgage insured by the federal government.
To be more specific, HECM loans are insured by the Federal Housing Administration, which is a small sub section of what is known as the U.S. Department of Housing and Urban Development (HUD in short). How does this work? Well, the FHA basically tells HECM lenders how much they can lend to any given borrower based on their age and the value of their home. The HECM program therefore can limit your loan cost while the FHA guarantees that reverse mortgage lenders will meet their obligations.
How Does a Hecm Compare to Other Types of Reverse Mortgage
It is now widely accepted that HECM loans generally provide the largest loan advance of any reverse mortgage.
Imost cases, this means they will also provide a lot more cash than any other program in its class, not to mention the most choices in how you can have that cash paid out for you. Of course, a HECM loan doesn't require that you divulge how that money is going to be spend. That's totally up to you. And although HECM loans don't come cheap by any stretch of the imagination, they can be much less costly than some of the other reverse mortgage lenders selling their product on the market.
There is one exemption. A HECM reverse mortgage cannot compete with the prices of similar products offered By state or local governments. But these loans typically must be used for one specific purpose only - you might only be able to put the money toward home repairs or property taxes, which isn't always convenient for you.
Who is Eligible for This Type of Reverse Mortgage
When it comes to this type of reverse mortgage, you must hail from one of the 50 states, the District of Columbia or Puerto Rico. If you are from Texas, you are put of luck.
You must be 62 years or older and be the the current owner of your home. But there is more: Your house must be your place of dwelling and it must be a single-family residence, a condominium or part of a planned unit development. That means cooperatives and mobile homes are generally not acceptable for this type of reverse mortgage.
As with most reverse mortgages, you must repay a HECM loan in full when the last surviving borrower dies or sells the home. But those payments may also need to be paid if you allow the property to deteriorate beyond the reasonable wear and tear that is to be expected as the years go by. You may also be asked to pay the remained of this loan if all of the borrowers permanently move to a new principal residence or you fail to pay property taxes or hazard insurance on your property.
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