Does My Home Qualify for a Reverse Mortgage?
Homes That Could Qualify
Reverse mortgages are popular loans that many seniors age 62 and older are using to help access a portion of their home equity. With this loan, borrowers remain in their homes and do not have a monthly mortgage payment, as long as they comply with their loan terms, including paying their home insurance, taxes, and for ongoing maintenance. Before applying for a reverse mortgage make sure you learn as much as you can about the loan—including what home types may be leveraged with this viable retirement tool.
Single Family Homes
The most common type of home that qualifies for a reverse mortgage is a single-family home. As long as you occupy the home as your primary residence, your single family home could qualify.
Multi-family homes that contain up to 4 units, such as duplexes, triplexes, and quadruplexes, could qualify for reverse mortgage loans as long as one of the units is the main residence.
Although there are some condominiums that may not qualify for a reverse mortgage, the majority of them could qualify. Those that could qualify are confirmed on an approved list by the Federal Housing Administration (FHA), which can be found here: https://entp.hud.gov/idapp/html/condlook.cfm?qls=WPO_10815lib.promote001
If you find your property on this approved list, then it could qualify as a reverse mortgage condo.
Although many mobile homes are not eligible, manufactured homes could qualify as long as they are approved by the U.S. Department of Housing and Urban Development (HUD) and fulfill requirements set by the FHA. According to HUD, the following must be true in order to qualify:
- Have a floor area of not less than 400 square feet
- Be constructed after June 15, 1976, in conformance with the Federal manufactured home construction and safety standards, as evidenced by an affixed certification label in accordance with 24 CFR Section 3280.8; (manufactured homes produced prior to that date are ineligible for insured financing)
- Be classified as real estate
- The mortgage must cover both the manufactured unit and its site and shall have a term of not more than 30 years from the date amortization begins
- Be built and remain on a permanent chassis
- Be designed to be used as a dwelling with a permanent foundation built to FHA criteria
- The finished grade elevation beneath the manufactured home or, if a basement is used, the grade beneath the basement shall be at or above the 100-year return frequency flood elevation
- The home must not have been installed or occupied previously at another site or location
Farms on Agricultural Land
Farms could also qualify depending upon the acreage of land and the value of the home. It is possible for the actual house on a farm to be valued at, as an example, one-fourth of what the entire farm is worth. Therefore, a reverse mortgage would not be calculated using the value of the entire farm property, but rather the value of the house that sits on it, regardless of the rest of the property. In addition, if the property is income-producing, it loses its eligibility to qualify for a reverse mortgage.
Homes That Do Not Qualify
Although many types of homes could qualify for a reverse mortgage, there are a few types that do not. Here are a few homes that reverse mortgages do not cover.
Second Homes and Vacation Homes
Many potential borrowers wonder if it is possible to get a reverse mortgage on second homes or vacation homes. Unfortunately, the answer is no. Reverse mortgages were designed with the intent to help senior homeowners age in their principal residence. Thus, second homes and vacation homes do not qualify, as neither property is the borrower’s primary residence.
Although some manufactured homes could qualify, mobile homes do not. Homes covered by reverse mortgages must be considered permanent property attached to land.
Cooperatives are apartment-type dwellings in big cities like New York City, where residents own shares of the property rather than the property itself. Co-ops are usually owned by a corporation and run by a board. However, they do not qualify under reverse mortgages guidelines. According to the FHA, the co-op structure does not meet the requirement of the loan because it is not secured by real property, since it would be secured by shares instead.
Multi-Family Homes of More Than 4 units
Multi-family homes with more than four units do not qualify because they are considered commercial property and not residential property. Only residential properties are considered for reverse mortgages.
If you are still unsure about whether or not your home could qualify, speak with a reverse mortgage professional at 1-888-998-3147 to confirm. Experts at American Advisors Group can answer your reverse mortgage questions and provide details about the eligible home types and borrower qualification. If you and your home are eligible, a reverse mortgage loan may provide you a comfortable retirement—one you deserve to enjoy in the beautiful house that you call home.
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