subject: 5 Tips How Reverse Mortgages Work – The Requirements [print this page] 5 Tips How Reverse Mortgages Work The Requirements
The basic things about how reverse mortgages work are simple. But to get the full idea, a senior has to talk with a counselor, relatives and with the other seniors, who have experiences of how reverse mortgages work in the real life. One good sign is, that the popularity of these loans have grown, even multiplied.
When seniors wonder, how reverse mortgages work, the first thing is to understand, that these loans are always taken against the equity of the home. So a senior must have an own home, where he or she has equity left, because the reverse loan will release that equity and turn it into cash money. The couple can be the borrower and altogether 3 persons, but then all must be owners and fulfil the qualifications.
1. The Minimum Age.
How does reverse mortgage work and what is a reverse mortgage target? The idea is to arrange cash money for American seniors, who are at least 62 and who own their homes, where they live permanently. These people are called cash poor but equity rich.
2. The Reverse Loan As The Only Mortgage.
If a borrower has an usual mortgage left, he has to pay that away with the reverse loan, because a borrower can have only one mortgage at a time. This is a good thing, because it will release more cash for the daily use, because the reverse loan has zero monthly payments. The capital, the interest and all the expenses will be paid away, when the loan will be closed.
3. The Accepted Home Types.
The rules are very flexible and almost all home types are accepted. Only some types of dwellings do not qualify and some type of motor homes have special rules. The accepted home types must meet the FHA property standards and flood requirements. The home must include 1-4 units, with at least one unit for the borrower, they can be single family homes, HUD-approved condominiums or FHA approved manufactured homes.
4. An Obligatory Counseling.
The idea of the obligatory counseling is to protect the seniors and to give them an opportunity to get personal guidance, useful tips about the legitimate lenders and information about the alternative options. The counselors do not try to sell anything.
5. The Income Or Credit Score Requirements.
As said earlier the reverse loan is always taken against the equity of the home, which will be the only guarantee. The law says, that a borrower must take a mortgage insurance, which will cover the costs of the loan, which the selling price of the home cannot cover. So the lender is not interested about the credit score nor the income information, because he will get his share in all cases.
