Reverse Mortgage, Part 2: How to Get a Reverse Mortgage
Qualification for a reverse mortgage is quite different then for a typical real estate loan. The most significant differences are that there is effectively no income or credit qualification required.
Also, the amount of the loan is determined by the value of the home and the age of borrower (in the case of a husband and wife, it is the age of the younger borrower). Keep in mind that all borrowers must be at least 62 years old. As an example, a 70year old borrower would be able to borrow up to about 60% of the value of the property.
Finally, nearly all reverse mortgages are FHA loans, and can be either fixed or adjustable interest rate. The current maximum FHA loan is $765,600.00, which would be the maximum loan in most cases. For that 70year old above, that would mean that you could get buy or refinance up to a $1,270,000.00 property. If the value is higher, you would have to pay the difference in cash.
Qualification is relatively simple:
- Start with your net income
- Subtract all housing monthly expenses-tax, insurance, association fees
- Subtract all monthly indebtedness-car payments, credit cards, all personal loans
- Subtract $0.14/square foot of the property
The net remaining income must be at least $998.00/month.
And that’s all it takes to completely eliminate thousands of dollars in monthly housing costs every month. As an example, assume a value of $700,000.00 and a loan of $420,000.00. at 4.0% interest, the principle and interest payment would be $2,004.00. With a reverse mortgage, the payment is “$0.00”. This could be a major advantage to many borrowers.
As always, please contact us to discuss this and any other real estate issues. Our goal is to help you make the right real estate decisions for you. Call 949-500-6365, email Frank@FrankDiLauro.com . You can also find us on Instagram “FrankandSusan”
