A reverse mortgage can be a powerful tool for homeowners looking to unlock retirement income from their home’s equity, but it isn’t available to everyone. Before you get too far into planning how you might use the funds, it helps to understand reverse mortgage eligibility requirements so you know exactly where you stand.
The Basic Requirements
To qualify for the most common type of reverse mortgage, the Home Equity Conversion Mortgage (HECM), you’ll generally need to meet the following criteria:
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Age – You must be 62 or older. If you’re married and your spouse is younger, they may still be protected under certain conditions even if they aren’t listed as a co-borrower.
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Home equity – You need substantial equity in your home, typically at least 50%, though this can vary based on your age and current interest rates.
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Primary residence – The home must be your primary residence, meaning you live there most of the year. Vacation homes and rental properties don’t qualify.
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Property type – Single-family homes, most condos, and 2-to-4 unit properties (as long as you occupy one unit) are typically eligible. Some manufactured homes qualify too, provided they meet FHA standards.
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Financial assessment – Lenders review your income, credit history, and payment record on debts like taxes and insurance to confirm you can keep up with ongoing obligations such as property taxes and homeowners insurance.
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Counseling session – Before applying, you’re required to complete a session with a HUD-approved reverse mortgage counselor, which helps ensure you fully understand how the loan works.
Does Your Home Qualify?
Not every property type is eligible, and even within eligible categories, there are a few extra considerations:
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The home must meet FHA property standards, so significant repairs may need to be addressed before or after closing
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Co-ops typically don’t qualify for HECM reverse mortgages
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Existing mortgage balances must be low enough to be paid off using the reverse mortgage proceeds
What Disqualifies Someone From a Reverse Mortgage?
A few common reasons applicants don’t qualify include:
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Being under age 62
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Not having enough equity in the home
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The home not being the borrower’s primary residence
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Outstanding federal debt, such as unpaid federal taxes, that isn’t resolved before closing
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Insufficient income or credit history to reasonably maintain property taxes and insurance
Many of these issues can be addressed with some planning, so it’s worth having a conversation even if you’re not sure you qualify yet.
Eligibility Doesn’t Mean It’s Automatically the Right Fit
Meeting the requirements is just the first step. A reverse mortgage is a significant financial decision, and it should align with your broader retirement goals, whether that’s covering everyday expenses, eliminating an existing mortgage payment, or creating a financial cushion for the years ahead.
Find Out Where You Stand
Every homeowner’s situation is a little different, and the best way to know for sure if you qualify is to talk it through with someone who understands the details. At Sun American Mortgage, we’ve spent 40 years helping homeowners across Arizona, Utah, New Mexico, and California explore whether a reverse mortgage fits their retirement plans.
Curious if you meet the requirements? Get an instant quote today or connect with one of our loan officers to talk through your eligibility.
