Before you apply for a reverse mortgage, find out it you will qualify.
Reverse Mortgage Qualifications
Qualifying for a reverse mortgage is not at all like qualifying for a traditional mortgage. The two types of mortgages are opposite in purpose and so qualifying guidelines are very different. For example, a traditional mortgage has to be repaid every month, so it is important to prove that you earn enough income to make those payments. Conversely, a reverse mortgage does not have to be repaid until the last borrower moves from the house or dies. With a reverse mortgage, income is not a requirement. Following is a brief list of qualifications that normally apply for a reverse mortgage loan approval.
- Age: The youngest borrower on a reverse mortgage loan must be at least 62 years old. The older the borrowers are at the time of the application, the higher the loan amount available. The amount of loan proceeds is usually determined using the borrowers' ages, the amount of available equity in the home, and the current interest rate.
- Income: You do not need to prove that you have any sources of income. There are no monthly payments to make. The purpose of a reverse mortgage is to provide the borrowers with added cash flow. You will, however, want to make sure that the proceeds from the reverse mortgage are enough to meet your needs.
- Assets: You do not need to have money in the bank. You only need to own a qualified property with sufficient equity.
- Credit: Your credit score and payment history does not matter. It does not matter how much debt you have. The only factor that could prevent you from taking out a reverse mortgage loan on your home would be an open bankruptcy or unpaid federal debt like student loans or tax liens. Bankruptcies are acceptable as long as they have been discharged.
- Property: Not all property types are acceptable to reverse mortgage lenders. Condominiums, manufactured homes, multi-unit buildings, and expansive land may or may not qualify. The home must pass inspections, so a home in disrepair could be a problem. Before you spend any money on a reverse mortgage loan application, check with your reverse mortgage lender to make sure your home can be approved.
Reverse mortgage qualification is much easier than that of traditional mortgages. And they are the only mortgages that don't carry higher interest rates for people with bad credit.
Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.