You may already know that a reverse mortgage is a financial transaction in which an older citizen is able to convert some of the equity he has built from his home into a cash loan. The borrower can also withdraw the money as a single lump sum or elect to have payments distributed over a period of time. Unlike a traditional mortgage or loan, however, the repayment of a reverse mortgage is made when the owner passes away, moves from the home, or sells the property.

What you may not yet know is the history behind reverse mortgages and the roles the Housing and Urban Development (HUD) office plays in the market. One of the first reverse mortgages was created by the HUD's Federal Housing Administration (FHA) and was called The Home Equity Conversion Mortgage (HECM). Under this plan, the organization allows older citizens to withdraw money against the equity of their homes, whereby essentially creating the first reverse mortgage.

The money can be used by the borrower to cover any emergencies or unexpected expenses or simply to supplement social security and other meager income. The HUD’s HECM can also be used to buy a principal residence, should he have enough reserves to cover the difference between the amount of the loan from the HECM, the sales price of the home for sale, and the closing costs of the new home.

The HUD’s reverse mortgage transaction is one of the most popular programs for reverse mortgages in the U.S. among aging seniors and baby boomers. While a reverse mortgage can be a wonderful decision for some, you must keep in mind that this is a complex financial transaction that can be easily manipulated by fraudulent mortgage companies and representatives who want only to take advantage of you as a borrower.

It is always best to consult with a competent reverse mortgage office and approved HUD’s housing councilors who will be able to point you to the right FHA lender. The HUD services are available for a very low cost and as we discuss later, is required for the approval of your reverse mortgage as a simple precaution for your protection from fraudulent activity.

Who qualifies for the HUD reverse mortgage?
To qualify for the HUD’s reverse mortgage you should be a homeowner and at least 62 years of age. Another condition is that you should own your home outright and it should be your primary residence. You can also qualify for the HUD’s reverse mortgage loan even if you are currently paying mortgage on your home, however, the mortgage balance must be low enough so that you are able to close it with the amount received from the HUD’s reverse mortgage plan.

What kind of homes qualify for the HUD’s reverse mortgage?
The type of homes approved by the HUD’s reverse mortgage are single family homes or the 1-4 unit home where the borrower is staying in one of those units. Even condominiums and other kinds of housing qualify if they are HUD approved.

How much can you borrow?
In a HUD’s Reverse Mortgage the borrower has to make absolutely no payments at all to the lender during the life of the loan. Moreover, there are also no income level threshold regulations that will deny you approval for a reverse mortgage because you don’t make enough money. The amount of the loan you can receive depends only on your age, the sales price of your home, or the FHA’s reverse mortgage loan limit - whichever amount is lesser.

The thumb rule is that the higher the value of your property and the older you are, the more you will be eligible to borrow under the HUD’s reverse mortgage guidelines. The borrower will still be responsible for paying real estate taxes and insurance on the home. Lastly, with a HUD reverse mortgage, your home can never be foreclosed on and you can never be forced to vacate the premises – in other words, your home is still yours.

Should you outlive the tenure of the reverse mortgage and the duration of the loan, you will have no need to repay the loan as long as you continue to stay in your property and are current in the payment of all taxes and insurance.

In what forms are payments in reverse mortgage made?
There are five options available:
Tenure – Here you can receive equal monthly payments. The condition’s are that at least one of the borrowers lives and uses the premises as the principal residence.
Term – Here the HUD’s reverse mortgage will give you equal monthly payments for a fixed amount of time that is negotiated by you and the lender.
Line of Credit –You can choose when you want to withdraw the cash, just like a bank account. The cash available to you till the line of credit is not exhausted.
Modified Tenure- You can have the flexibility to choose a combination of line of credit and a monthly payout as long as you occupy the property.
Modified term – Here you can also add a fixed period of time, and then choose a combination of line of credit and monthly payments.

Protection
Finally, the HUD has made it mandatory that before borrowing every applicant must seek financial counseling from a HUD approved counselor. Here, the borrower will learn and understand what a reverse mortgage is, how it can be obtained, and all the important details in between. The intention is to educate the borrower on the legal and financial obligations of a reverse mortgage, warn of potential consequences that could arise, and generally give guidance to a borrower seeking a reverse mortgage from a neutral and unbiased perspective.

After the counseling session is complete, the borrower will be given a "certificate of counseling" by the HUD, which is required to process the application. A reverse mortgage can be a wonderful option for many aging seniors and baby boomers, and taking advantage of the free powerful resources available from the HUD is incredibly important for a successful reverse mortgage.

http://www.legacyreversemortgage.com