How to Qualify for a Reverse Mortgage

By now you've heard enough about reverse mortgages to excite your curiosity. It is true that reverse mortgages can change lives. If you meet the following requirements, a reverse mortgage might be exactly what you need to make the most of your golden years.

Age: The youngest borrower must be at least 62 years old or older to apply for a reverse mortgage loan. You must meet the minimum reverse mortgage age to be considered for approval.

Income: You do not have to make a monthly payment when you get a reverse mortgage. For this reason, you do not need to prove that your income is sufficient to repay the loan. In most cases, paying off a reverse mortgage is accomplished by selling the house after the last borrower no longer uses it as a primary residence.

Assets: There is no minimum balance that you must have in a bank account. No liquid reserves are required to qualify. The only asset you need to be approved for a reverse mortgage is the house you offer as collateral. You must own the home free and clear or have a significant amount of equity. The greater the amount of available equity, the greater your maximum claim (loan amount) could be.
If you have liquid assets, such as certificates of deposits or stocks, they are not part of the reverse mortgage agreement. Reverse mortgages are non-recourse loans, which means that the only thing the reverse mortgage lender can use to repay the loan is the home offered for collateral. You still have the ability to will any assets you have, in addition to any remaining home equity, to your reverse mortgage heirs.

Credit: Unlike a traditional mortgages, your credit score is unimportant. There is no minimum credit score required. The reverse mortgage lender doesn't consider how much debt you have because there is no debt-to-income ratio requirement. The only thing that could prevent you from qualifying would be an open bankruptcy. You would have to wait until your bankruptcy was discharged before applying.

Property: Occupancy of the home offered for collateral is very important. The home must be occupied as a primary residence throughout the life of the reverse mortgage. Renting or vacating the home violates the reverse mortgage agreement and causes the lender to call the loan.

Not all types of properties are eligible. The home must be one that the reverse mortgage lender can easily appraise. Single family homes in a typical neighborhood where there are substantial sales to use as comparable values are easiest. 1-4 units are also eligible, but must meet occupancy requirements. Manufactured homes must meet FHA requirements: built after 1976, at least 400 square feet, on a permanent foundation, and above 100 year flood elevation. Condominiums must be on the FHA approved project list.