Which Properties are Eligible for an FHA Reverse Mortgage
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, outside of large apartments, is only in the business of insuring properties in which the home owner actually lives on the premises.
As such, reverse mortgages are first and foremost owner occupied properties. I get many questions about financing second homes and investment properties. Not happening.
Now, does that mean their can be no investment activity or income from an eligible property? No, it simply means one must live in the property. one to four unity properties are acceptable if the owner lives in one.
Common sense would tell us that if this were true then an owner occupied bed and breakfast would be eligible as well. No, FHA doesn't like it as it smacks of commercial use.
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.
If a home sits on one hundred acres and a home on 5 acres is customary, the lender will finance the value of the home on 5 acres and nothing more. The additional acreage must be surveyed off.
Manufactured housing is fairly misunderstood. It can work for a reverse mortgage but the home must have been built in 1977 or later, be a double or triple wide, and have permanent foundation.
Other properties eligible for FHA financing are cooperatives, condominiums, and townhouses.
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, outside of large apartments, is only in the business of insuring properties in which the home owner actually lives on the premises.
As such, reverse mortgages are first and foremost owner occupied properties. I get many questions about financing second homes and investment properties. Not happening.
Now, does that mean their can be no investment activity or income from an eligible property? No, it simply means one must live in the property. one to four unity properties are acceptable if the owner lives in one.
Common sense would tell us that if this were true then an owner occupied bed and breakfast would be eligible as well. No, FHA doesn't like it as it smacks of commercial use.
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.
If a home sits on one hundred acres and a home on 5 acres is customary, the lender will finance the value of the home on 5 acres and nothing more. The additional acreage must be surveyed off.
Manufactured housing is fairly misunderstood. It can work for a reverse mortgage but the home must have been built in 1977 or later, be a double or triple wide, and have permanent foundation.
Other properties eligible for FHA financing are cooperatives, condominiums, and townhouses.
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.
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posted by Credit Counseling at
9:54 PM
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