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Reverse Mortgage

What’s Required To Qualify For A Reverse Mortgage?

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What You Need to Know About Reverse Mortgage

Are you stuck with a mortgage that you can no longer afford to pay? If so, then you may be wondering if you qualify for a reverse mortgage. A reverse mortgage is basically a loan that allows homeowners to cash in on the equity of their home. The money can be used for anything they want, whether it’s to supplement their income, pay off debts, or cover the costs of home repairs.

Reverse mortgages are for borrowers aged 62 or older that seek to use them to borrow against the equity in their homes. The loan doesn’t have to be repaid until the borrower dies, moves out of the house, or sells the property.

This type of loan is beneficial for those homeowners that don’t have sufficient retirement savings or income to cover their living expenses. If you qualify for a reverse mortgage, it could provide you with the financial security and peace of mind that you need.

Requirements for a Reverse Mortgage

So, what’s required to qualify for a reverse mortgage? Keep on reading to find out.

You Must Be a Homeowner

The most obvious requirement someone needs to qualify for a reverse mortgage is that they must be a homeowner. You must own a home that has equity in it. This is because your home will serve as collateral in which the lender can recoup their investment if you default on the loan.

Age Requirements

As mentioned, a reverse mortgage is specifically designed for older homeowners without any other source of retirement income. They can access the equity built up in their home to supplement their Social Security or pension. For this reason, you must be at least 62 years old to qualify for a reverse mortgage. If you want your spouse to be included in the loan, they must also meet this age requirement.

Equity Requirements

In a traditional mortgage, the loan amount depends on the market value of the property and the borrower’s creditworthiness. But for a reverse mortgage, the loan is based on the equity of the home. The older you are, the more equity you’re likely to have. And the more equity you have, the higher the loan amount will be.

Generally speaking, you need to have at least 50% equity in your home to qualify for a reverse mortgage. But this number can vary depending on the type of loan and the lender you’re working with.

Income and Credit Check Requirements

The good thing about a reverse mortgage is that it doesn’t require a minimum income. This is because the loan is based on the equity of your home, not your ability to repay the loan. A credit score is also not a factor in determining whether or not you qualify for a reverse mortgage. However, alternatives such as home equity loans and HELOCs may come with fewer fees and can be less expensive if you qualify.

Counseling Requirements

According to U.S. HUD or the Department of Housing and Urban Development, any borrower that wants to take out a reverse mortgage must first undergo counseling. This is to ensure that you fully understand how the loan works and what its implications are. All advantages, as well as downsides, will be explained to you during counseling.

You can receive this counseling for $125, and it will only take at least an hour and a half of your time. Be sure to ask all the questions you have so that you can make an informed decision about whether or not a reverse mortgage is the right choice for you.

Up-Front Cost Requirements

Another thing that you should know if you are planning to qualify for a reverse mortgage is that there are some up-front costs involved. These include the origination fee and the mortgage insurance premium. In most cases, the money you’ll be using to pay for these expenses will be rolled into the loan. That means you don’t have to worry about coming up with the cash upfront. The only thing that should be noted is that up-front costs are on the higher side, which can end up eating into a chunk of your loan amount.

When Should You Consider a Reverse Mortgage?

Many homeowners that are aged 62 and above are still confused as to whether or not they qualify for a reverse mortgage. The truth is that it’s not for everyone. You should really consider all your options before making a decision. It can be a good loan if you are in need of extra cash and you qualify for it. But if you’re not sure, then maybe it’s best to seek professional help first before making a decision.

If you need a large amount of cash and you don’t have a stable income to settle with the monthly payment of HELOC or traditional home equity loan, then a reverse mortgage could be the best solution for you. As long as you keep up with the responsibilities that are required of you, then have no fear of losing your home.

What Can You Do If You Don’t Qualify for a Reverse Mortgage?

While the majority of applications for a reverse mortgage are approved, there are still some that get denied. If you find yourself in this situation, you shouldn’t worry too much. There are other things you can do to get the cash you need without having to qualify for a reverse mortgage.

Sell and Downsize

Assuming that you and your spouse are the only ones living in your home, then it might be a good idea to sell and downsize. This way you can have the cash you need without having to qualify for a reverse mortgage. Not to mention, you can also save on costs such as insurance, property taxes, and utilities.

Sell Your House to Your Family

Whether it’s a son, daughter, grandkids, or any other family member that’s interested in buying your home, try to work out a deal with them so that they can buy your home from you. This way, you can keep your home in the family while also getting the cash you need. You can also rent the house to your family if they’re not interested in buying it outright.

Final Thoughts

A reverse mortgage is a good solution for those who need extra cash but don’t qualify for traditional home equity loans. However, it’s not for everyone and there are some things you should know before you qualify for a reverse mortgage. Be sure to educate yourself and schedule counseling so you can better make decisions about your finances.

By knowing where your finances stand and having a clear understanding of what you’re getting into, you can make the best decision for your needs. If you qualify for a reverse mortgage and think it’s the best solution for your financial needs, then go for it. But if you don’t qualify or you’re not sure if it’s the right solution, then maybe it’s best to consider other options.

About the Author

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Rick Munster

Rick Munster is a personal finance expert and author with over 21 years of experience in the credit counseling industry. He currently serves on the board of directors for the Financial Counseling Association of America and has written over 200 articles on personal finance. Rick's expertise has been recognized by several prominent online organizations, which have quoted him on issues related to credit counseling, debt management, and financial education. With more than 20 years of experience at Money Fit, a non-profit credit counseling organization, Rick has established himself as a trusted authority in the field of personal finance.
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  1. Services: DRS provides the following housing-related services: counseling that includes Homeless Assistance, Rental Topics, Pre-purchase/Homebuying, and Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase); Education courses that include Financial literacy (including home affordability, budgeting, and understanding use of credit), Predatory lending, loan scam or other fraud prevention, Fair housing, Rental topics, Pre-purchase homebuyer education, Non-delinquency post-purchase workshop (including home maintenance and/or financial management for homeowners), and other workshops not listed above.

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Disclosure to Client for HUD Housing Counseling Services

Debt Reduction Services, Inc. and its financial education arm, Money Fit by DRS, offer the following housing counseling and educational services related to housing, personal finance, and bankruptcy certificates to consumers:
  • Housing Education Courses: DRS offers many online self-guided education programs classified as Financial, Budgeting, and Credit Workshops (FBC), Fair Housing Pre-Purchase Education Workshops (FHW), Homelessness Prevention Workshops (HMW), Non-Delinquency Post Purchase Workshops (NDW), Predatory Lending Education Workshops (PLW), Pre-purchase Homebuyer Education Workshops (PPW), and Rental Housing Workshops (RHW). These courses help participants increase their knowledge of and skills in personal finance, including home affordability, budgeting, and understanding the use of credit, as well as predatory lending, loan scams, and other fraud prevention topics, fair housing, rental topics, pre-purchase homebuyer education, non-delinquency post-purchase topics including home maintenance and/or financial management for homeowners, homeless prevention workshop, and other workshops not listed above relating to personal finance and housing. Course details are found below under “Housing Workshops.”
  • Home Equity Conversation Mortgage (HECM) Counseling (RMC): Via telephone and virtual platforms, we offer the required HECM counseling nationwide in addition to in-person counseling in Boise, Idaho. We also offer in-home counseling options in thirty counties across southern Idaho for an additional fee to cover our travel and additional staff time costs.
  • Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase) (FBC): Clients receive counseling and materials on the proper maintenance of their home and mortgage refinancing. Clients can find help and resources by phone, in our Boise office, or virtually on all topics related to stabilizing their long-term homeownership.
  • Services for Homeless Counseling (HMC): Clients receive phone, virtual, or in-person (Boise) counseling to evaluate their current housing needs, identify barriers to and goals for housing stability, establish a path to self-sufficiency, and connect with emergency shelters, income-appropriate housing, and/or other community resources (e.g. mental healthcare, job training, transportation, etc.).
  • Pre-Purchase Counseling (PPC): Clients receive counseling through the entire homebuying process. Assistance may involve creating a sustainable household budget, understanding mortgage options, building their credit rating, and putting together a realistic action plan to set and achieve homeownership goals.  Additionally, clients will receive materials and resources about home inspections and other homeownership topics relevant to successfully maintaining a home.
  • Rental Housing Counseling (RHC): Via phone, in-person appointments (Boise, ID), or virtual platforms, clients receive housing counseling relevant to renting, including rent subsidies from HUD or other government and assistance programs. Topics can also address issues and concerns having to do with fair housing, landlord and tenant laws, lease terms, rent delinquency, household budgeting, and finding alternate housing.
DRS also offers the following services:
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  • A Student Loan Repayment Plan Counseling and application service.

Relationships with Industry Partners

Through such services, DRS has established financial relationships with hundreds of banks, credit unions, and creditors such as American Express, Bank of America, Barclays, Capital One, Chase, Citibank, Credit One, Discover, Synchrony, US Bank, USAA, Wells Fargo, and others.

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The client is not obligated to receive, purchase or utilize any other services offered by DRS or its exclusive partners to receive financial education or housing counseling services. Alternatives: As a condition of our counseling services, in alignment with meeting our client services goals, and in compliance with HUD’s Housing Counseling Program requirements, we may provide information on alternative services, programs, and products available to you, if applicable and known by our staff. Alternative DMP services include negotiating better repayment terms directly with your individual creditors, paying your debts as agreed, or, in extreme cases, filing for personal bankruptcy. Alternative credit and education services can be found through MyMoney.gov or the Jump$tart Clearinghouse of online financial education resources. Housing counseling alternatives can be found through HUD at www.hud.gov/findacounselor.
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Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

Rental, Fair Housing, Predatory Lending / HOEPA, Post-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. credit, budgeting, homeless prevention, debt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).

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Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

Rental, Fair Housing, Predatory Lending / HOEPA, Post-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. credit, budgeting, homeless prevention, debt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).