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FHA HECM |
FHA HECM is the short form of Home Equity Conversion Mortgage, which is the only reverse mortgage program that is offered by HUD. There are two options – HECM Standard and HECM Saver. Each of these options has its own merits and demerits. Whichever option you choose, you have a good opportunity to use the equity in your home to meet various expenses and even pay for a little portion of the debt on the first lien mortgage. A reverse mortgage loan may be a better option than a home equity or refinance loan, because of the fact that there is no fear of payment delinquency or foreclosure.
FHA HECM Program
FHA HECM program is open to all homeowners who are over 62 years of age. The borrower must use the home as primary residence, and the property must be a one-to-four unit dwelling. The underwriting requirements include an appraisal of the home, which must be carried out according to the appraisal guidelines set for any FHA single family home. A condo is also qualified under the program, but it must be a HUD approved condo. Similarly, a manufactured home must meet the standard FHA guidelines for manufactured homes. These qualification guidelines are same for both the options of Home Equity Conversion Mortgage program.
FHA HECM Saver
FHA HECM Saver is different from HECM Standard in that the borrower has to pay significantly lower upfront fees in the former case. The initial mortgage insurance premium is 0.01 percent of the maximum claim amount in the case of HECM Saver whereas it is 2 % in the case of the Standard version of the program. In lieu of the payment you make towards insurance premiums you get a surety that you would be able to pay your reverse mortgage debt even if your home sells at a lower value.
The disadvantage of choosing the FHA HECM Saver plan is that the amount of money available to you will be less than what you can obtain through HECM Standard. The maximum amount you can borrow is dependant on home value, current interest rate, borrower’s age and the FHA lending limits. You can check FHA lending limits under a reverse mortgage program on the website of the US Department of Housing and Urban Development.
FHA HECM Guidelines
The FHA HECM guidelines containing the policy details for lenders, appraisers and other users can be found in HUD Handbook 4235.1. Additional information and resources can be found on the HUD website.
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These may include mortgagee letters and other documents pertaining to origination fee, appraisal, loan servicing, HECM for purchase program, principal limit factors and more. The application should be submitted through an FHA approved lender. But before that one needs to meet an HUD-approved HECM counselor or counseling agency. A list of approved HECM counselors can be found at the resource page of HUD website.
Website: www.hud.gov
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