Reverse Mortgage Doesn't Work for All Properties
I'm getting a ton of calls recently in regards to properties that in no way meet the standards for an FHA insured reverse mortgage.
FHA insures the vast majority of all reverse mortgages closed by lenders in the U.S. Lenders must follower their rules if they want the safety of the FHA mortgage insurance.
A quick background of FHA, it was set up in the 30's to as a way to facilitate the financing of residential housing. In other words, it was set up to increase homeownership.
It was and currently is not interested in investor loans on a small residential scale.
As such, reverse mortgages are first and foremost owner occupied properties. I get many questions about financing second homes and investment properties. Not happening.
This does not pertain to all investment properties. For instance, if the owner lives on the premises of a one to four unit property, with tenants, the property would still qualify for financing.
What if the owner lives in the property and it is used as a bed and breakfast? No. FHA will not allow for any commercial purpose even if the owner lives on site.
Some customers come to me with a home on large acreage. The lender will finance a home and land up to what is customary for the area.
A good scenario is a house on fifty acres. It's not hard to find this in the outskirts of Dallas or Houston. If many local homes have sold on this much land, it can fly otherwise it won't. I the norm is 2 acres, 48 acres will be survey off.
Manufactured housing is fairly misunderstood. It can work for a reverse mortgage but the home must have been built in 1977 or later, be a double or triple wide, and have permanent foundation.
Additional home types include townhomes, condos, and Co-ops.
Non-FHA insured reverse mortgages are out there with greater flexibility in terms of property types. Be careful of these. A system of checks and balances doesn't exist with these loans as it does with an FHA insured reverse mortgage.
FHA insures the vast majority of all reverse mortgages closed by lenders in the U.S. Lenders must follower their rules if they want the safety of the FHA mortgage insurance.
A quick background of FHA, it was set up in the 30's to as a way to facilitate the financing of residential housing. In other words, it was set up to increase homeownership.
It was and currently is not interested in investor loans on a small residential scale.
As such, reverse mortgages are first and foremost owner occupied properties. I get many questions about financing second homes and investment properties. Not happening.
This does not pertain to all investment properties. For instance, if the owner lives on the premises of a one to four unit property, with tenants, the property would still qualify for financing.
What if the owner lives in the property and it is used as a bed and breakfast? No. FHA will not allow for any commercial purpose even if the owner lives on site.
Some customers come to me with a home on large acreage. The lender will finance a home and land up to what is customary for the area.
A good scenario is a house on fifty acres. It's not hard to find this in the outskirts of Dallas or Houston. If many local homes have sold on this much land, it can fly otherwise it won't. I the norm is 2 acres, 48 acres will be survey off.
Manufactured housing is fairly misunderstood. It can work for a reverse mortgage but the home must have been built in 1977 or later, be a double or triple wide, and have permanent foundation.
Additional home types include townhomes, condos, and Co-ops.
Non-FHA insured reverse mortgages are out there with greater flexibility in terms of property types. Be careful of these. A system of checks and balances doesn't exist with these loans as it does with an FHA insured reverse mortgage.
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Learn the ins and outs, low down, five big pitfalls to avoid for the California reverse mortgage. Many more answers and a good old fashioned education can be had about the California reverse mortgage by following this link.
posted by Credit Counseling at
10:36 PM
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