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Monday, January 5, 2009
There seems to be some confusion as what types of properties are eligible for financing with a reverse mortgage.
The Federal Housing Administration is the insuring body for 95% of all reverse mortgages. That means they write the rule book from which the mortgage companies follow if they wish to stay competitive.
FHA has always been considered the first time home buyer's mortgage. It's not really a mortgage. It's an insuring body for the mortgage and was set up in 1934 to increase home ownership.
FHA is not in the business of helping the investor as much as it is the actual resident who owns and lives in the property.
So, the first thing to understand, as a basis for understanding FHA insured reverese mortgages, is that the reverse mortgage is for owner occupied properties. Rental homes and second home do not qualify.
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.
Then there are grey area properties, in which the owner lives their, but they are have more of a commercial use. A good example is a bed and breakfast. This won't qualify.
In Texas I get calls from customers with a home on many acres. At a certain point the lender can only finance that which is the norm for any particular location.
For example: if a home resides on 200 acres and the typical home in the area is on 3 acres, the mortgage company closes a loan on the home and 3 acres only. The remaining acreage can not be part of the transaction.
In some rural areas I get calls regarding manufactured homes. This is okay under certain conditions: Home is built after 1976, double or triple wide, and sits on an approved FHA foundation.
Additional home types include townhomes, condos, and Co-ops.
Other types of properties qualify for a reverse mortgage. The problem is the mortgages are what is known as proprietary financing and are not regulated as much by FHA. The rules and benefits are far different.
The Federal Housing Administration is the insuring body for 95% of all reverse mortgages. That means they write the rule book from which the mortgage companies follow if they wish to stay competitive.
FHA has always been considered the first time home buyer's mortgage. It's not really a mortgage. It's an insuring body for the mortgage and was set up in 1934 to increase home ownership.
FHA is not in the business of helping the investor as much as it is the actual resident who owns and lives in the property.
So, the first thing to understand, as a basis for understanding FHA insured reverese mortgages, is that the reverse mortgage is for owner occupied properties. Rental homes and second home do not qualify.
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.
Then there are grey area properties, in which the owner lives their, but they are have more of a commercial use. A good example is a bed and breakfast. This won't qualify.
In Texas I get calls from customers with a home on many acres. At a certain point the lender can only finance that which is the norm for any particular location.
For example: if a home resides on 200 acres and the typical home in the area is on 3 acres, the mortgage company closes a loan on the home and 3 acres only. The remaining acreage can not be part of the transaction.
In some rural areas I get calls regarding manufactured homes. This is okay under certain conditions: Home is built after 1976, double or triple wide, and sits on an approved FHA foundation.
Additional home types include townhomes, condos, and Co-ops.
Other types of properties qualify for a reverse mortgage. The problem is the mortgages are what is known as proprietary financing and are not regulated as much by FHA. The rules and benefits are far different.
About the Author:
Get the facts, 7 myths and five reverse mortgage mistakes in California. Other informations and a good old fashioned education can be had about the California reverse mortgage by following this link.
posted by Credit Counseling at
10:15 PM
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