Reverse mortgage requirements

Age comes first among the reverse mortgage requirements: each HECM borrower must be at least 62. Then the home must be your main residence, enough equity is needed to clear any mortgage, and you also have to pass a financial assessment plus a session of counseling.

Approval is not guaranteed by any one of these requirements. A lender checks each of them, while a HUD-approved counselor can explain your position before you apply.

The reverse mortgage age requirement

Washington's financial regulator gives the rule plainly: every homeowner must be 62 or older, and the house must have at least one owner living there.

HUD's factor is based on the youngest borrower's age, so age affects both eligibility and the amount. Using the default rate, these figures apply to a $450,000 home:

If a spouse is under 62, that person may still be protected as an eligible spouse who does not borrow. That spouse's age then determines the loan amount, so the amount goes down. The heirs guide explains what remains for that spouse.

Getting a reverse mortgage at 55

At 55, a HECM is not available. Some private proprietary loans begin at younger ages. State law also matters. The New York regulator says reverse mortgages there are generally available to owners 60 or older. Learn how private loans differ in jumbo reverse mortgage.

How much equity must you have for a reverse mortgage?

No fixed percentage applies. The HECM's principal limit after costs must cover every mortgage and lien against the home.

Consider a 70-year-old who owns a $450,000 home. The figure for the principal limit is $173,700. Once $18,500 in costs is deducted, $155,200 remains for paying off the mortgage.

• A $100,000 mortgage can be paid off, leaving $55,200.
• The HECM falls $4,800 short of a $160,000 mortgage. The loan cannot close unless you provide that money at closing.

For reverse mortgages, the FTC's comparison contrasts a home owned outright or one with a small mortgage against the 20% equity usually needed for a home equity loan or HELOC. Add your mortgage balance to the calculator to find the shortage or remaining funds.

The home: what FHA accepts

The home must be your main residence, where you live most of the year. Vacation or rental properties cannot carry a HECM. These home types qualify:

• houses for one household
• small multi-unit homes; one unit is your residence
• townhouses
• condos that follow FHA's rules
• manufactured homes that follow FHA's rules

A home in good repair is required. Any repairs identified by the appraiser must be completed before closing, or funds must be set aside to finish them afterward.

Condos and reverse mortgages

A condo qualifies when its building appears on FHA's approved list or when the individual unit receives FHA approval on its own. Before paying for an appraisal, have the lender review the project.

Reverse mortgage on a mobile home

A mobile home does not qualify if the land beneath it is rented. A manufactured home may qualify when it was built according to HUD's federal manufactured home code. It must also sit on a permanent foundation, stand on land you own and be taxed as real estate. Units constructed before the federal code came into effect do not qualify.

Reverse mortgage credit requirements

HUD does not set a minimum credit score for a HECM. The lender instead completes a financial assessment that reviews:

• if you have made on-time payments for property taxes, insurance and any mortgage
• your credit record during the past few years
• if your income covers your living expenses and the home's bills

A poor result does not always lead to denial. The lender may reserve part of your loan for property taxes and insurance, which reduces the amount available to you. You must clear delinquent federal debt, including a federal tax lien, often with money from the loan.

Counseling comes first

A lender cannot take your application until you meet a HUD-approved counselor. The FTC reports that agencies often charge around $125, and you can pay the fee from the loan. Read about this in reverse mortgage counseling.

What can disqualify you?

• A borrower younger than 62.
• A home that serves as anything but your main residence.
• A mortgage that exceeds what the HECM can pay off, without cash to cover the difference.
• A condo or manufactured home that fails FHA rules.
• Federal debt that remains unpaid at closing.
• A financial assessment showing that you cannot maintain tax and insurance payments when a set-aside cannot cover them.

Questions people ask

1. Which three main requirements must you meet to get a reverse mortgage?

   You must be 62 or older, have enough equity in your main residence and complete HUD-approved counseling. Every borrower must meet the age requirement.

2. Can you get a reverse mortgage if you are younger than 62?

   You cannot borrow through a HECM at that age. You may name a younger spouse as eligible without that person becoming a borrower. Certain private reverse mortgages establish lower age limits.

3. If my credit is bad, can I still qualify for a reverse mortgage?

   That may be possible. HUD has no minimum score requirement, yet a lender looks at your payment history and might call for a set-aside covering taxes and insurance.

4. Is it possible to get a reverse mortgage on a mobile home?

   Only a home built to HUD's code as a manufactured home can qualify. It must be fixed to a permanent foundation, stand on land you own and be taxed as real estate.

5. Is a reverse mortgage available when my house still has a mortgage?

   Yes, provided the HECM can cover the mortgage payoff. At closing, your principal limit pays off the old loan, and any remaining funds are yours.