Home Equity Conversion Mortgages (HECMs) are the only reverse loans that are insured by the federal government. Only reverse mortgage lenders approved by the Federal Housing Administration (FHA) can offer HECMs, which are the most popular reverse mortgage program in the U.S. Here are some things to know about reverse loans.
To borrow with HECM loans you must obtain counseling from an FHA-approved agency. HECM counselors must:
•Pass a standardized exam administered by HUD;
•Complete training related to HECMs within the previous two years;
•Have access to technology that allows HUD to track the results of counseling to clients;
•Retake the HECM exam every three years.
To find a reverse loan counselor in your area you can contact the Housing Counseling Clearinghouse at (800) 569-4287, or search online. Prepare a list of your concerns and questions about reverse mortgages before your counseling session.
HECM and Home Equity
When you take out a reverse mortgage, you tap into your home equity. Unlike a traditional mortgage that requires you to make monthly payments, a reverse home mortgage pays you. The more valuable your home is, the more you may be able to borrow. The amount you can get also increases as you age.
As long as you live in the home as your principal residence and stay current with insurance and taxes, you can stay without paying back a reverse loan. Remember, proceeds from a reverse mortgage can be used to buy another home to live in as your principal residence.
Compare Reverse Mortgage Lenders
Even though reverse mortgage lenders must meet federal guidelines, it is still important to shop around to compare reverse loan quotes. Make sure you understand all the closing costs, terms, and conditions associated with any reverse mortgage you are considering.