Many retirees who want to stay in their homes for the long term often think about getting a reverse mortgage. However, before they can get one, their homes need to meet certain criteria, and they might need to make some changes to the house to fit the needs of older residents over time.
Most reverse mortgages available today are known as Home Equity Conversion Mortgages (HECMs), which are insured by the Federal Housing Administration (FHA), under the Department of Housing and Urban Development (HUD). These reverse mortgages are available for homeowners aged 62 or older and let them turn part of their home equity into a loan that they can use for any purpose. Unlike a traditional mortgage, the balance of a reverse mortgage increases over time.
The big difference with reverse mortgages is that borrowers don’t have to make monthly repayments. The loan only needs to be paid back when the borrower passes away or permanently moves out of the house.
Since most reverse mortgages are backed by the federal government, properties need to meet certain standards to qualify for HECMs.
**What are the property requirements?**
**Building Codes:** For FHA approval, homes must comply with national building codes or state/local building codes based on national standards.
**Home Utilities:** Even though there’s no specific requirement for features like doors, windows, and kitchen cabinets, HUD sets minimum standards to ensure the home retains its value.
**Safety:** The property must be free from hazards that could jeopardize the health and safety of the occupants or the structural stability of the house.
**Getting Your Home FHA-Approved:**
To secure a reverse mortgage, your home must meet FHA/HUD building standards and pass an inspection before the loan is finalized. Sometimes, the amount of work needed to meet these standards can be a challenge, but companies like Fidelity Homestead Associates can assist with home repairs and restoration.
**Acceptable Properties for HECMs:**
Homes that qualify for HECMs include single-family homes, 1-4 unit homes where the borrower lives in one unit, HUD-approved condominiums, and manufactured homes that meet FHA guidelines. Even newly built homes can qualify if they have a certificate of occupancy issued by the local authorities and are fully completed and occupied by the owner.
**Ineligible Properties for HECMs:**
Properties that don’t qualify for HECMs include housing cooperative units, boarding houses, bed and breakfast establishments, and certain modern manufactured homes built after 1976. For more information about property eligibility for reverse mortgages, you can visit HUD.gov or speak with a financial advisor.