An FHA reverse mortgage is a reverse mortgage insured by the Federal Housing Administration. These loans are also commonly referred to as Home Equity Conversion Mortgages (HECMs). The Federal Housing Administration, or FHA, is a branch of the Department of Housing and Urban Development (HUD). Both FHA and HUD are government agencies dedicated to improving housing conditions and securing the mortgage market. One way these agencies accomplish this is by insuring mortgage loans.

Why Is FHA Mortgage Insurance Important?

FHA reverse mortgages currently dominate the reverse mortgage market. Because these loans are insured by FHA, they are a safer option for lenders. Fortunately, FHA mortgage insurance also offers two significant benefits to borrowers. The first is that mortgage insurance guarantees that every borrower will receive the reverse mortgage proceeds due to him or her. Even if a lender goes out of business, their borrowers will continue to receive their monthly payments or have access to their line of credit.

The second benefit is that FHA insurance makes reverse mortgages non-recourse loans. This means that borrowers can never owe their lender more than their home is worth. If a borrower’s loan balance exceeds their home value, FHA will compensate the lender for the difference. This protects borrowers from owing large sums of money after selling their home and repaying their lender.

Who Qualifies for an FHA Reverse Mortgage?

To get an FHA reverse mortgage, consumers must meet certain requirements set by FHA. To qualify for a loan, consumers must be at least 62 years old, own an approved property, and have a large amount of equity. Approved properties include one to for unit residences, as well as condominiums and manufactured homes built after 1976. Seniors must also use the home as their primary residence both before and after getting the loan.

If you meet the requirements for an FHA reverse mortgage and want to know more, contact us for more information regarding this unique loan product.