A home equity conversion mortgage insured by the Federal Housing Administration offers seniors age 62 and older an option for drawing on the equity in their homes. A second home, vacation home and certain rental properties don’t qualify, according to the National Reverse Mortgage Lenders Association, but you can get a reverse mortgage for a single-family home, town home or eligible manufactured homes. A condominium approved by the Department of Housing and Urban Development also qualifies.
If you have considerable equity in your home and need cash or want to pay off the balance of the principal you owe, you can apply for a reverse mortgage. While a HECM is the most common type of reverse mortgage loan, there are other reverse mortgage products available. You can use money you receive from a reverse mortgage to pay off bills, cover health care costs or as additional retirement income. To qualify, the home you use to get the loan must be your primary residence. That means you must live in the home for more than half the year.
A manufactured home not attached to a permanent foundation or one built before June 15, 1976, won’t qualify for a reverse mortgage. The Federal Manufactured Home Construction and Safety Standards, or HUD Code, regulate the design and construction of manufactured homes. Manufactured homes constructed prior to the implementation of HUD Code usually do not meet FHA standards. A manufactured home built after June 1976 that does not conform to the HUD Code also will not qualify for refinance.
A second home, including a vacation home or resort property, does not qualify for a reverse mortgage. Since the basic requirement for a reverse mortgage is living in the home for most of the year, if you don’t use it as your primary residence you can’t borrow against the available equity. An exception that applies is when one of the co-borrowers on the reverse mortgage lives in a nursing home. As long as the other borrower continues to live in the home, and signs and returns the occupancy certificate to the lender each year, the primary residency requirement is met.
Under HUD guidelines, you can use rental properties that have two to four housing units as collateral for a reverse mortgage as long as you own the property and live in one of the units as your main home. To get an FHA-backed loan on a condominium, the entire condo complex must be FHA-approved for your individual unit to qualify. If more than 15 percent of the units in the condo association where you live are more than 60 days past due on paying assessment fees, you won’t qualify for a reverse mortgage.
- National Reverse Mortgage Lenders Association: Reverse Mortgage Basics
- New York Department of Financial Services: Reverse Mortgages -- What You Need to Know
- HUD.gov: Manufactured Home Construction and Safety Standards
- Consumer Financial Protection Bureau: Can Anyone Apply for a Reverse Mortgage Loan?
- HUD.gov: HECM for Purchase Frequently Asked Questions
- HUD.gov: FHA Reverse Mortgages (HECMs) for Seniors
- Trulia: What Does “FHA Approved Condo” Mean?
Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.