Reverse mortgages can provide financial stability and supplemental income in retirement while you continue to age in place in the home you love. But not all homes will meet the requirements of the strict guidelines that are put in place by HUD to ensure safety standards. HUD requires properties to meet minimum standards for safety and maintenance to qualify for a HECM.
Find out if your home meets the Department of Housing and Urban Development (HUD) minimum standards to receive a reverse mortgage
Property Type
The type of property that you own is the first factor to consider when determining if your home will me eligibility requirements.
HUD-Approved Condominiums
The Federal Housing Administration (FHA) has specific guidelines in place to secure their investments when it comes to lending in housing associations. For example: 50% of units must be owner-occupied, adequate reserves and more. You can visit the HUD Approved Condominium search page here, and find out if your property address is approved.
If your condo isn’t currently approved, you can discuss getting it approved with the association or board, but many individual owners may not be willing to go through the long approval process.
Single Family Homes and Multi – Unit Properties
Homes that serve as the primary residence of the borrower and 2–4-unit properties that have at least one unit that is occupied by the borrower. Buildings with more than 5 units are considered commercial and cannot qualify for a reverse mortgage.
Manufactured Homes
This type of home has a few requirements that must be met to adhere to HUD’s eligibility standards.
Date of construction before June 15, 1976,
The home must sit on a permanent foundation and be classified as real estate,
FHA has incorporated minimum standards of property condition to ensure that homes are a safe and secure place for residents to remain.
FHA Approved Appraisal
An FHA approved appraiser will evaluate your home and its condition to ensure that it meets safety and livability standards. For example, they will be looking for functioning mechanicals, any evidence of wood destroying insects or water damage and other conditions you can find in the HUD Appraisal Policy Guide on pages 65-68.
Required Repairs
If there are issues with the home that kept it from meeting FHA requirements but are repairable, you will have time during the process to get those items repaired. You can find more information on minimum required repairs here on pages 68 and 69.
Occupancy
For your home to be considered for a reverse mortgage, it must be your primary residence or the residence where you spend most of your time.
You will be required to occupy the property for the duration of the loan
If you as the borrower move out of the property or reside elsewhere for an extended period of time (typically more than 12 consecutive months), the reverse mortgage will become due.
Title Requirements
The title to the property must be clear or have minimal outstanding mortgage debt to qualify. This will simplify the process and protect borrowers from any potential complications.
You must hold a clear title to your property, ensuring that no disputes, liens or property claims can get in the way of the transfer of ownership.
If there is an existing mortgage, the balance must be able to be paid off with the proceeds of the reverse mortgage
Compliance with Local Codes
In addition to FHA standards, there are also local and city building codes that must be met in order to get a loan against the property.
The appraiser may identify violations during the evaluation process that may be corrected to meet the minimum standard of the code.
If there are any recorded code violations on record with your local municipality, those violations must be addressed in order to move forward.
Tip: You may be able to find building code and violations by googling building department records <your local municipality name>
Whether you are exploring a reverse mortgage to ease a financial burden or for overall financial security in retirement, understanding HUD’s criteria will help you prepare for the appraisal process and supports you in getting ahead of any potential issues. Use all the resource links that we shared above to learn as much as you can.
If you are uncertain of your home’s eligibility, consulting a HUD certified housing counselor or reaching out to a trusted educational resource can provide clarity and guidance.
Melinda Opperman
Article written by
Jeff Michael is the author of More Than Money, a debtor education guide for pre-bankruptcy debtor education, and Repair Your Credit and Knock Out Your Debt from McGraw-Hill books. He was a contributor to Tips from The Top: Targeted Advice from America’s Top Money Minds. He lives in Overland Park, Kansas.
