When considering a reverse mortgage, it’s important to be aware of financial assessment underwriting guidelines, specifically the minimum residual income requirements set forth by HUD.
These requirements are an important part of the lender’s application process to ensure that you, as a borrower, can comfortably handle ongoing property-related expenses such as property taxes, homeowner’s insurance, and maintenance costs after obtaining the reverse mortgage.
We will provide clear, easy-to-follow tables that outline the minimum residual income needed based on your family size and the region of the United States where you reside. Moreover, we will explain what types of income are considered acceptable by lenders.
2024 Regional Residual Income Requirements
|4 or more
Eligible Income Sources for Reverse Mortgage
Employment income — This is the most traditional type of income. It’s income you earn through working for an employer.
Documentation — Your lender will ask for your IRS Form W-2, which should document your income on a calendar year basis. The lender must verify two years of employment and income with documentation. You will also need pay stubs for at least the most recent 30 days and one additional form of employment verification, such as a statement from your employer. (Some alternative forms of documentation may apply.)
Non-borrowing spouse or other household member income — If you are getting the reverse mortgage, your spouse will not be named on the loan, or if someone lives in your home but does not own the home and will not be named on the loan, their income may also apply. It’s not considered income for the lender’s assessment, but it’s worth mentioning and documenting in case it can help show a more accurate picture of your finances.
Documentation — You’ll need to provide the Social Security number of the person whose income you’re including and the documentation required for your employment income.
Part-time employment income — Generally covers less than 40 hours per week. It counts toward your income under the financial assessment if you have had the job for at least two years and are likely to continue in the job. If your wages have changed, your lender will average your wages over time.
Overtime and bonus income — Additional income that falls outside your average salary in the form of overtime or bonuses. The lender must verify that it has been received for at least the past two years and is likely to continue.
Seasonal employment income — This may be earned on a seasonal basis rather than a year-round basis. Again, it must have been earned for at least the last two years and is reasonably likely to continue the following season.
Accessory Dwelling Unit (ADU) — A smaller housing unit on a property, often called an ADU, can bring in rental income. If you want to use this rental money to help qualify, the underwriter must check how much you can earn from your ADU. The lender will ask for specific forms that show the usual rent prices in the area. If you already have future rental agreements, the bank might want to see those, too.
Additional Income Types
There are other types of income and benefits that the lender will take into consideration that are worth noting.
These include things like:
- Employer housing subsidy
- Income from employment from a family-owned business
- Self-employment income
- Commission income
- Rental income
- Disability benefits
- Pension or retirement benefits
- Annuity income
- VA benefits
- Social Security
- Workman’s compensation
- Public assistance
- Interest, dividend, and trust income
Comparing Income Requirements: Reverse Mortgages vs. Other Loan Types
|Minimal; HUD minimal residual income requirements
|Strict; based on income-to-debt ratio
|Moderate; based on home equity and income
|Varies; often based on credit score and income
|Credit Score Impact
|No minimum credit score
|High credit score required for best rates
|Good credit score needed for favorable terms
|Depends on lender; higher scores get better rates
|Not a primary factor
|Crucial factor, usually below 43%
|Considered but less strict than traditional mortgages
|Varies; important for qualification
|Not typically required
|Other Financial Assessments
|Assessment of ability to pay property taxes and insurance
|Comprehensive financial background check
|Based on home equity and overall financial health
|May include overall financial history and current debts
Key Questions and Answers on Income Requirements
What are the residual income requirements for a reverse mortgage?
Is a debt-to-income ratio (DTI) required for a reverse mortgage?
Can assets count as a source of income?
Why do lenders care about income if there are no monthly payments?
Is there a maximum income that would keep you from qualifying for a reverse mortgage?
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