Reverse Mortgage Qualifications- 3 Qualifications You Must Meet
07/19/2010 A reverse mortgage is a unique way for a homeowner to access equity in his or her property, and mortgage lenders have begun to recognize the usefulness of this resource. Reverse mortgages are becoming more common all the time and are easier to get now than ever before. There are three primary qualifications that must be met in order for a homeowner to take out a reverse mortgage.
o The homeowner must be at least 62 years old. o The homeowner must own no less than 30% of the equity of the home. o The homeowner must not intend to pass the home to his or her heirs as inheritance.
But beyond these requirements, there are three other advisable qualifications to meet. These are not rules--rather, these are recommendations.
Shop for rates. The reverse mortgage industry has grown significantly in recent years. Take the time to compare mortgage rates among numerous lenders in your area. Try to get quotes from at least three or four lenders, and tell them that you're getting quotes from their competitors. Reverse mortgages have exceptionally high closing costs, and when mortgage lenders compete with each other, the first thing they cut is closing costs. You can save yourself a great deal of money simply by informing lenders that you're shopping around.
Get an ARM loan. Take out an ARM loan rather than a fixed rate loan if you plan to access your equity in monthly installments. Fixed-rate loans are best if you plan to take out all your equity as one lump sum, but if you plan to use it as income over time, the adjustable rate gives you access to a line of credit that can tap into additional equity when you need it. With a fixed-rate loan, you don't have this option.
Think long term. Don't take out a reverse mortgage as a short term loan. Never do this. With a short term loan, the closing costs will be the highest expense, and as mentioned above, reverse mortgages are notorious for having extremely high closing costs. If you don't plan to utilize the reverse mortgage for a long period of time, find another way to access your home equity. The true value of a reverse mortgage can be captured only in the long term.
