Reverse Mortgage Income Requirements in 2025

July 1, 2024

Understanding Reverse Mortgage Income Requirements

Welcome to our guide on reverse mortgage income requirements! This article will explain the financial assessment underwriting guidelines, particularly the minimum residual income requirements set by HUD.

These requirements play a crucial role in the lender’s application process, ensuring that you, as a borrower, can comfortably manage ongoing property-related expenses such as property taxes, homeowner’s insurance, and maintenance costs after securing a reverse mortgage.

We will provide clear, easy-to-follow tables that detail the minimum residual income needed based on your family size and the region of the United States where you reside. Additionally, we will clarify what types of income lenders consider acceptable.

Table of Contents

• 2025 Regional Residual Income Requirements

• Eligible Income Sources for Reverse Mortgage

• Additional Income Types

• Comparing Income Requirements: Reverse Mortgages vs. Other Loan Types

• Key Questions and Answers on Income Requirements

• 2025 HUD Credit Guidelines Update:

2025 Regional Residual Income Requirements

Family Size	Northeast	Midwest	South	West
1	$540	$529	$529	$589
2	$906	$886	$886	$998
3	$946	$927	$927	$1,031
4 or more	$1,066	$1,041	$1,041	$1,160

This table reproduces the "Table of Residual Incomes by Region", which is a part of a Cash Flow/Residual Income Analysis. It shows the required residual income by family size for the regions of Northeast, Midwest, South, and West.

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
Disability
Workman’s compensation
Public assistance
Interest, dividend, and trust income

Comparing Income Requirements: Reverse Mortgages vs. Other Loan Types

Loan Type	Income Needed	Credit Score	Debt Limits	Job Proof
Reverse Mortgage	Just a little—covers taxes & insurance	No minimum needed	Not a big deal	Usually not
Traditional Loan	Strict—needs steady pay	High score for best rates	Under 43% of income	Yes
HELOC	Some—plus home value	Good score helps	Easier than traditional	Usually yes
Personal Loan	Depends—score matters	Better score, better deal	Depends—often key	Often yes

This table outlines the differences in income requirements and related financial assessments for Reverse Mortgages, Traditional Mortgages, HELOCs, and Personal Loans. It highlights how each loan type varies in terms of income verification, credit score impact, debt-to-income ratio, employment verification, and other financial assessments. This comparison can help understand the unique financial prerequisites of each loan type.

Wondering If Your Income Qualifies? Get a free quote with expert help from All Reverse Mortgage—America’s #1 with a 4.99/5-star rating! Call (800) 565-1722 or click here for your free quote —simple, trusted, 100% secure!

Key Questions and Answers on Income Requirements

What are the residual income requirements for a reverse mortgage?

Residual income is the remaining amount of income after all other obligations have been paid. HUD requires different amounts of residual income based on family size and where the property is located (due to cost of living differences nationwide). The lowest required residual income is $529 per month (for a family size of 1 in the Midwest and South) and as high as $1,160 per month (for a family size of 4 or more in the West).

Is a debt-to-income ratio (DTI) required for a reverse mortgage?

Reverse mortgages do not consider debt-to-income ratios and instead rely on a residual income analysis to determine eligibility, which is a more accessible threshold to meet. For example, if a single person in the state of California had a monthly income of $3,000 and total monthly expenses of $2,000, they would have a 66.67% Income Ratio ($2,000/$3,000), which would not qualify you for most (if not all) traditional mortgages. However, for a reverse mortgage loan utilizing a residual income analysis, this person would have a $1,000 residual income ($3,000 – $2,000) and meet the minimum requirement of $589 for a family size of 1 in the West.

Can assets count as a source of income?

When considering stable monthly income for reverse mortgage borrowers, HUD will consider all the exact income requirements as a forward or traditional loan. Additionally, reverse mortgage borrowers get to use what is known as Asset Dissipation. Asset Dissipation is a calculation whereby you divide the totality of liquid assets verified by a borrower by their life expectancy from the actuarial tables to derive an adequate income on paper to aid in the residual income analysis. When you divide $150,000 by 180 months, you get $833.33 per month in the income you get to add to their other “traditional” pay for the residual income analysis. This calculation can also consider the remaining available funds from the reverse mortgage. For example, if a borrower with a 180-month life expectancy has $100,000 in a savings account and receives $50,000 in net proceeds from the reverse mortgagee, they have $150,000 that can be dissipated.

Why do lenders care about income if there are no monthly payments?

Borrowers must demonstrate that even with the reverse mortgage, they have adequate income to continue to live in the home comfortably, paying installments of taxes, insurance, and all other property charges as due because non-payment would constitute a default under the loan terms. Compile documentation and discuss any income or assistance you receive with your lender. Working through the financial assessment and qualifying for your reverse mortgage may be necessary.

Is there a maximum income that would keep you from qualifying for a reverse mortgage?

There is no maximum amount of money you can make and still be eligible for a reverse mortgage. If you qualify for the minimum to make your payments of taxes, insurance any other debts you owe and still have a small amount left to live on each month as specified in the HUD financial assessment guidelines, you qualify for the loan. There is no maximum you can make as the loan is not a needs-based program that is only available to those whose income is limited.

2025 HUD Credit Guidelines Update:

Municipal or state pensions no longer need to demonstrate the likelihood of continuation for credit qualification purposes.

Source

Understanding Reverse Mortgage Income Requirements

ARLO recommends these helpful resources:

HUD Financial Assessment and Property Charge Guide (.pdf document)

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Have a Question About Reverse Mortgages?

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Post your question in the comments below and anticipate a personalized response from Mr. Branson himself, typically within one business day. He's here to illuminate all angles of reverse mortgages, ensuring you're equipped with the knowledge to make informed decisions. Take this opportunity to gain insights from a seasoned professional.

46 Comments on this Article

Tammy
July 1st, 2024

In WA state can a homeowner earn short-term rental income on their primary residence if they also reside in the home full-time?
Reply to Tammy
- Michael Branson
  July 2nd, 2024
  
  Hello Tammy,
  Each city and municipality has its own laws regarding rentals, and I am not aware of any statewide rules that regulate rental requirements, but I am also not an attorney. The restrictions on short-term rentals may vary in different areas of the same city based on specific zip codes, short-term permits already issued, proximity to tourist areas, or other considerations that I cannot begin to consider.
  You should check with your city to determine the laws for short and long-term rentals in your specific location. If you live in an incorporated city, the rules dictating long and short-term rentals will probably be listed on their website.
  If you have a reverse mortgage, you can rent a room long-term as long as you still live in the property as your primary residence, but short-term rental is considered commercial use of the home and is not allowed. Short-term rental, such as Airbnb use of the home, is not allowed under the terms of the reverse mortgage. However, if you wish to rent a room on a month-to-month or annual rental agreement to augment your income, HUD allows this non-transient living arrangement.
  Reply to Michael
David L.
March 29th, 2023

Hi Arlo,

My wife and I are both 80 years young. Our home is valued at $330,000+. We have an outstanding mortgage of $29,000. We have a U.K. social security pension of$16,000 per month and a US social security pension of $325.00 per month. Yet we were declined a reverse mortgage because a U.K. social security pension is not accepted. Why?
Reply to David
- Michael Branson
  March 29th, 2023
  
  Hello David,
  
  Generally, any stable, verifiable, and expected continued income can be used for qualification purposes, but I don't know your specific circumstances. I did not see your file and did not know how you filed. I know that some pensions and other benefits are not taxable in the US if they are tax-exempt in the country from which they originated. If this is your case, the lender would have no way to verify the income. This is what HUD says about using Social Security income:
  
  If your retirement income was not claimed on your US tax return, the lender might be unable to supply adequate information to verify the income HUD requires. I do not want to say that your cause is lost, though, because I have not seen your documentation, and we have closed some loans with income received from foreign social security payments. If you report all your foreign income on your US tax returns, I encourage you to try another lender and get a second opinion. I would encourage you to visit our calculator to see what you can expect, and let us take a look if you have been reporting the income on your US tax returns.
  Reply to Michael
Scott
October 30th, 2022

Can a Hero / Pace loan be paid off to qualify for a HECM loan?
Reply to Scott
- Michael Branson
  October 30th, 2022
  
  Yes, Hero/Pace loans are considered mandatory obligations and can be paid with HECM proceeds. I have not seen penalties charged for paying it off? The processor must check the tax rolls to make sure they are not including the portion of this amount in the taxes to make sure they are not included in the RI calculation.
  Reply to Michael
Sharon
September 28th, 2022

Hi Arlo,

I am trying for a reverse mortgage, but I am told after everything is figured in I might be $800 month short for income
Reply to Sharon
- Michael Branson
  September 28th, 2022
  
  Hello Sharon,
  
  There are a few ways to combat a shortfall in monthly income. Assets can offset insufficient funds, sometimes some debt can be paid off, sometimes a LESA account can be established whereby funds are set aside to pay the taxes and insurance as they come due. If none of these measures work though, HUD feels that it is better that a borrower knows that before they exhaust their income and start considering other possibilities such as selling the home and downsizing or a move to a less expensive location.
  Other options if you can hold out long enough include finding a job that would give you the income you need or perhaps renting out a room or two in your home for the income (but you need a history of renting out the rooms so that is not something you can do then qualify for a reverse mortgage with this income a month later).
  
  Have you gotten a second opinion on other options to resolve the residual income shortfall? If not, I would suggest that as your first step. It's always better for people to look at things long term and hopefully this is not hitting you with a short needed time to act.
  Reply to Michael
  - Penelope
    August 25th, 2023
    
    I am currently working PT at a healthcare facility as a PCA. In order to qualify for a reverse mortgage, I must be on the job for 2 years. I have been on the current job for 1 year. However, I obtained employment at another healthcare facility as a PCA. Will the reverse mortgage requirements still consider this as 2 year employment since I am still in the same field and there is no gap in employment?
    Reply to Penelope
    - Michael Branson
      August 27th, 2023
      
      Your employment/income history should be satisfactory. When considering an applicant's income, the lender will look at your total history to determine if the income is stable and likely to continue. Moving from one employer to another and having 2 jobs in 2 years is not typically grounds for concern. Moving constantly with job gaps and in different fields could indicate a problem with unstable income/employment. However, someone who works in the same field and whose income is consistent or improving but moves from one employer to another with no gaps is usually not an issue. If there is a massive decrease in income with the move or it is much farther away from your home, it could warrant the underwriter asking for explanations. Still, otherwise, you should probably have no problems.
      Reply to Michael
Mike P.
June 10th, 2021

How do you verify VA disability income?
Reply to Mike
- Michael Branson
  June 18th, 2021
  
  HUD normally requires the underwriter to obtain the VA Form 26-8937, Verification of VA Benefits, showing the amount of assistance and the expiration date of the benefits if any.
  However, Per FHA there is currently a temporary waiver for the collection of the form 27-8937 only but the waiver to collect this form in no way impacts FHA's policy of what it requires to consider VA disability benefits as an acceptable source of borrower income.
  During the time this waiver is in effect, lenders will typically require the borrower to give them a copy of the veteran's last Benefits Letter showing the amount of the assistance and one of the two documents below:
  
  Federal Tax returns; or
  The most recent bank statement evidencing receipt of income from the VA.
  
  If the Benefits Letter does not have a defined expiration date, the VA disability income may not be eligible to be used for qualification purposes as there may be no way to verify that it is likely to continue for at least 3 years. HUD still requires lenders to show that they have verified that the lender has met HUD's risk requirements even though the 26-8937 form is not available at this time.
  So, to be able to have the disability considered stable monthly income, the lender is looking for verification of receipt and likelihood of continued receipt to meet the HUD requirements.
  Without the ability to do this, the borrower would need to be able to qualify with just other income sources available to then that they can verify.
  Reply to Michael
Chris
May 24th, 2021

Hi ARLO,

I'll be 62 this summer. My wife and I have $1 million saved and are thinking about buying a SFR in the Seattle, Washington area.

I work overseas and will only return to the US when I retire, which means I'll have no income or SS payments coming in. Would I still be able to get a reverse mortgage to buy a home in Seattle. (Most houses list for 600k-800k or more.) With the cash we have, we could pay for a house outright, but it would be better to simply pay half, and make monthly payments towards the reverse mortgage.

Are there lenders that could offer a HECM for purchase, or some other type of reverse mortgage even though I wouldn't have any substantial monthly "income"?

Thanks,

Chris
Reply to Chris
- Michael Branson
  May 24th, 2021
  
  Hello Chris,
  
  You must meet the HUD residual income guidelines to get the reverse mortgage and that does require some income.
  However, if you have liquid assets, the lender can use them to determine a projected monthly income based on the amount of the assets and your age pursuant to a HUD schedule to determine a monthly income from those assets.
  This is known as asset dissipation and even if you don't actually use the assets monthly, the fact that you have them available to use may qualify you for the loan.
  Reply to Michael
Carolyn B.
February 20th, 2021

I am 70 receiving widows benefits and also self-employed as an independent signing agent (notary). I was told beside the two tax returns and bank statements; I would need to provide a license for my service (as a notary we do not have licenses) three letters of referrals from the client I do closings for. Although I have invoice and payment proof for the closings, I perform with them. I am told this is a HUD requirement for reverse mortgage, therefore I am concern regarding letters of referral why this is need if we have everything else. Please can you help me understand this requirement.
Reply to Carolyn
- Michael Branson
  February 20th, 2021
  
  Hello Carolyn,
  
  HUD has implemented some requirements because of Covid to ensure that borrowers are still employed and that the numbers they used to underwrite the borrower's eligibility are still accurate.
  The underwriter may not know that in your state, notaries are not licensed (they are in many states). I would suggest that you send the lender copies of the laws from your state that regulate notaries that confirm that you are not required to be licensed in any way and send them the other documentation they requested.
  Your bank statements will show that you have continuing deposits from current assignments, your letters of referral and your letter of explanation with the printout from your state regarding notaries should be enough to meet their requirements.
  Reply to Michael
Jan B.
December 16th, 2020

If someone has lived at my residence for 20 years and we are not married, and they help pay for household bills, can their income be used also in addition to mine. The reason being is I am co-signor of a vehicle that they make payments on and it affects what HUD looks for in having enough income to pay for insurance and property taxes and other household upkeeps
Reply to Jan
- Michael Branson
  December 16th, 2020
  
  Hello Jan,
  
  You have a couple of options depending on where you live and the state laws.
  HUD always allows you to add this person to title and just use their income if that is the nature of your relationship and your desire. That way you would use their income as another borrower on the loan.
  You may also be able to just use their income because they live there to reduce the family size on the HUD calculations which brings down the residual income requirement.
  This would mean you need less money left after the payment of all debts to qualify.
  My suggestion is to determine your goals and desires and then to approach your lender to see what will work for your circumstances in the state where the property is located.
  Reply to Michael
Norma G.
November 7th, 2020

Do you need perfect credit rating for a reverse mortgage? My house is paid in full. I do not have a mortgage but not enough money to repair the house.
Reply to Norma
- Michael Branson
  November 11th, 2020
  
  Hello Norma,
  
  While HUD does incorporate financial assessment requirements, perfect credit is not a requirement.
  In fact, there are many ways to overcome credit obstacles if your credit has some issues.
  I would encourage you to contact a lender and give them an opportunity to give it a shot.
  We would be happy to run your credit for you if you are in a state in which we lend and give you and honest assessment.
  First visit our calculator to see what you might expect and then if the numbers look good, fill in the contact information and we will be happy to see if things work out for you.
  Reply to Michael
Esther P.
September 26th, 2020

Hello ARLO, I am a widow and I am thinking of selling my house. I already have a reverse mortgage. I owe $748,000. The house is worth 1.5 million or so. If I sell, I will walk away with $700,000 to $800,000 cash. My only income is social security total of which is 3,200 per month. I live in southern California.
Reply to Esther
- Michael Branson
  September 28th, 2020
  
  Hello Esther,
  
  I am not sure there is a question here. But with the sale of the home and the repayment of the existing loan, you have a lot of options.
  There are still places in Southern California where that amount of money will buy you a small home or a condominium for cash or you might rather use a reverse mortgage to purchase your next home and keep a larger chunk of the cash for living expenses and still never need to make a mortgage payment for as long as you live in that home as well.
  
  Some homeowners find the reverse mortgage a great way to downsize or even "rightsize" when they feel their current home just does not fit their needs any longer.
  The next home you buy might better suit your needs as far as being a single story, handicap accessible, on a golf course with a social club house if that is your desire or perhaps just closer to family or medical needs.
  The point is, if you do not feel as though your current home meets your needs or is too much maintenance or for whatever reason, the reverse mortgage will give you more options if the amount of equity you have alone will not get you into the home you desire, won't get you in and give you some funds on which to live afterwards or allow you to get the home you need to make the change worthwhile.
  Reply to Michael
David H.
September 14th, 2020

Tax returns do not show actual profits from me eBay business. allowable deductions do not accurately portray profits. Will this disqualify me for a reverse mortgage?
Reply to David
- Michael Branson
  September 14th, 2020
  
  Hello David,
  
  HUD does not have a stated income program. What that means is that to be able to use any income for qualification, you must be able to support and verify the income you wish to use.
  If you need self-employment income to qualify for a reverse mortgage, you must be able to support that income with your tax returns for the past two years. Thankfully, reverse mortgages do offer borrowers several methods to qualify.
  The underwriting utilizes a residual income method which means that after all debts are paid, borrowers need to have a minimum amount of income left each month on which they need to live that varies by family size but it is not a huge amount.
  Therefore, if it is just you or you and a spouse, you may still qualify with just a small amount of income if you have small or no debts. HUD will allow use of social security as well as asset dissipation (where you use a percentage of any assets in the borrower's possession as a monthly income for life), and even dissipation of the mortgage proceeds if that will help.
  You should still let us look at what you do claim, your assets and your debts to see if we can get you to qualify.
  Reply to Michael
Jeff C.
August 28th, 2020

I have some property in a trust and don't want to sell for a few more years due to the current events. Can I get a reverse mortgage on these properties to keep up with the taxes and insurance to keep from depleting the trust cash. All properties are payed off.
Reply to Jeff
- Michael Branson
  September 1st, 2020
  
  Hello Jeff,
  
  Borrowers age 62 and over may get a reverse mortgage on their primary residence that they have in their family trust providing the trust meets all of HUD's guidelines.
  Each trust is reviewed for acceptance and most do meet the requirements but those that do not are most often able file amendments so that they can still be used as long as the borrower is agreeable to so doing.
  You cannot get multiple reverse mortgages though and you also cannot get a reverse mortgage for any property you do not occupy as your primary residence.
  Reply to Michael
Cherry W.
May 19th, 2020

I have a total income of $503.00 per month. I live in Kentucky and Kentucky have property tax exemptions for Seniors, 65 and older. I will be 68 in June.

I lost my job at a call center, so I started renting some property in 2019. I live very badly. I have a lot of valuable property, but I am a minority and lenders conspire with City leaders to prevent the sale of property.

This program is supposed to help people like myself. I do not see why a portion of the proceeds can't be put aside to cover the anticipate short fall. The program is supposed to help people. The people who need help most cannot get help.
Reply to Cherry
- Michael Branson
  May 19th, 2020
  
  Hello Cherry,
  That is a lot to unpack but let me answer the one thing I can. HUD will allow a "set-aside" for the payment of taxes and insurance if after the payment of all your required bills/monthly obligations, you are at least positive in your residual income.
  The "residual income" is the amount of money you have available to you each month after all debts are paid. In order not to have the set aside, you would need to have at least a minimum amount of money left which you do not meet at your income after the payment of taxes, insurance, utilities and any other debts.
  However, if you do not have many other debts and you are exempt from payment of taxes (not deferred but exempt and not due at all), then the income requirement is very lenient. You just need money left over each month and with no taxes on your property due to the exemption, it would only need to pay the insurance so the set aside amount would not be very high.
  If after payment of your other debts (all credit payments, any taxes or mortgages on other properties that are not offset by positive rental income, etc.) you are negative each month, that would indicate that even with the reverse mortgage you are not in a position to be able to live in the home comfortably and would only be stripping the property of equity to have to eventually move anyway with less money.
  To give you a loan under those circumstances is not helping you or any borrower. If that is the case, you need to look at your circumstances and it is possible that a sale and relocation is in your best interest now before you strip the property of its equity.
  As for your other contentions of city leaders conspiring to prevent you from selling your property, if that is the case, that is illegal, and I would recommend that you seek legal aid immediately. There are free legal aid services throughout the country, and I would strongly suggest you investigate their services.
  Reply to Michael
- Marybeth
  May 20th, 2021
  
  I kind of have the same question, thought we did not need an income, just the payments from the house
  Reply to Marybeth
- Richard S.
  April 25th, 2022
  
  This is for Cherry, and, as it happens, she is correct that those who need the reverse mortgages the most probably won't qualify. As it happens, I made the foolish decision to take early retirement. Had some assets for a while, but these were nearly deleted several years later. At that point, I reluctantly decided to apply for a reverse mortgage loan. At first, the agent promised my application would be approved with no problem. Then, after reassuring me for several months, the loan application would definitely be approved, the agent sudden did an "about face" and informed me that I would be required to put up a realively sizable cash set-aside, which I couldn't afford considering my circumstances. Consequently, the loan application was declined. To make a long story short, I am now living below the federal poverty level, struggling for survival, and residing in a homeless shelter, and fear living on the street. From what I learned, the original premise of the heck is to help low and middle income seniors get back on financial solid ground. In reality, however, the effect is the exact opposite. After all, let's face it, while, say, a billionaire certainly wouldn't need to apply for reverse mortgage loan, s/he would almost certainly be approved hands down. On the other hand, those who are dependent on the loan for basic survival needs would have arbitrary obstacles thrown in their path.
  Reply to Richard
Barbara A.
August 3rd, 2019

I have two family home I live in and I've been renting other unit out for 20 years, 8 to my current tenants. Hubby and I want to get reverse mortgage, but tenant pays cash. We only bring in $1,310.00 a month social security as other income. Tenants pay $1,200.00 month. Can we qualify?
Reply to Barbara
- Michael Branson
  August 3rd, 2019
  
  Hello Barbara,
  
  Your tenant paying cash is no problem if you have been claiming the income on your taxes. If you have 2 years' tax returns showing the income, the lender will use that income to qualify you as well.
  Unfortunately, though, you can't say that you have been earning the income but just didn't claim it and expect one government entity to accept that if you haven't claimed the income in the past.
  That would be like telling HUD that you lied on your taxes but that they should believe you now because not you are telling the truth (and I am not saying you didn't, just showing you the reason why they would not use unreported income).
  Reply to Michael
Debra Meredith
April 13th, 2019

We've talked to a agent on reverse mortgages. I'm 62the youngest. My husband is on social security and a veteran . I own a business and the business had a loss last year and the agent told us we don't qualify is this true we fail ..please let me know..thank you..
Reply to Debra
- Michael Branson
  April 16th, 2019
  
  Hello Debra,
  
  It is correct that you must qualify based on HUD's criteria but having said that, I don't know if the agent is correct that you don't qualify because I don't know how they interpreted the income or what can or cannot be done based on your situation. I would encourage you to check with another lender. It could be that the first lender was correct and it could be that the lender overlooked something. You just never know and it doesn't hurt to check!
  Reply to Michael
Andrew A
August 20th, 2018

If you do not meet the $998 per couple residual income requirement but have excellent credit- could you place HOA and utilities in one calculation? Can you a separate LESA calculation for property taxes and homeowners insurance? If you are buying a resale home-are property taxes stay the same as what the current owner is paying? Are closing costs included in the percentage amount I must put down. For example at age 62 purchasing a $400,000 home at 59% would the $236,000 I put down include the closing costs?
Reply to Andrew
- Michael Branson
  August 20th, 2018
  
  Hello Andrew,
  You have asked some great questions for the purchase program and ones that I can't give you just a yes or no answer to. The residual income requirements can be met in many different ways including with cash reserves that can be used as dissipation of assets and then if you are close to the amount required but not quite there, there is always the Life Expectancy Set Aside(LESA) to pay the taxes and insurance that can be set up, but you have to remember that this means you would need even more money for closing as this amount would also have to be brought in because the amount available on your reverse mortgage would be less.
  The amount of your taxes would be determined by the county or taxing authority in the area where you are purchasing the property. Some areas have special programs where buyers over a certain age qualify for reduced rates, can have a one-time swap of the taxes from a previous home to a new property, or even an exemption.
  You would have to see what is available in your area to determine what your tax situation would be but remember this, you can tax advantage of any tax exemption or reduction program available, but not a tax deferral or postponement program where the taxes continue to accrue and are payable later. HUD does not allow borrowers to enroll in programs where taxes are accruing but are not paid but if they are waived and not due or reduced, that is perfectly acceptable.
  Check our calculator to see how much money you would need for the down payment and closing costs as it will give you a real time estimate for your ages and the area in which you wish to purchase. Then I would suggest that you check your qualifications based on your income and obligations in relation to the property costs to see if you need the LESA. If you have the funds for the LESA, chances are pretty good you also have the funds available to use for asset dissipation when calculating your income.
  The asset dissipation is a calculation that HUD uses based on the amount of the asset and your ages and determines how much you would have available if you had to draw a monthly amount of cash and even though you might not be using that money, we can use it in the qualification consideration. The more money you have and the older you are, the higher the monthly amount you would be credited as the funds would not have to last as long to cover for any perceived shortfall.
  HUD also now allows borrowers to have third parties pay reasonable and customary closing costs on purchase transactions so that is something to remember when negotiating a purchase if you can get the seller to pay some of your costs.
  Reply to Michael
Gordon C.
July 24th, 2017

Would you please give a complete list all of the deduction types, (Property tax, Utilities, etc. etc.) that are deducted from gross income to arrive at residual income for a Reverse Mortgage? Thanks in advance.
Reply to Gordon
- Michael Branson
  July 24th, 2017
  
  Hi Gordon,
  
  It's pretty easy really. You use any debts the borrower has (cars, credit cards, consumer loans including student loans, etc.), you use all property charges which include taxes, insurance, HOA dues (if any) and HUD currently uses a .14Â¢ per square foot allowance to cover utilities. The residual income is what is left with you subtract the sum of these numbers from the borrowers' gross income. For instance, let's assume you have gross income of $2500 per month.
  You have a car payment of $200.00 per month, credit cards of $75.00 per month, the taxes on the house are $600 per month and the insurance is $175.00 per month. The house is 3,000 square feet, so the HUD allowance for utilities and maintenance is $420 per month. When you add the cost items (200+75+600+175+420) you get $1470 that you now subtract from the $2500. For a family of 1 or 2, this would meet the residual requirement anywhere in the country. More family members would drive the residual requirement up and some places in the country are less expensive to live and therefore the residual requirement is less.
  
  There is an indication that there may be a change in September to the utilities calculation and borrowers may have to use an average of their actual utilities. Until HUD actually comes out and announces the change and how it will be calculated though, the .14Â¢ per square foot calculation is still in effect.
  Reply to Michael
  - Tom
    November 25th, 2020
    
    If a condo's HOA fees include utilities such as electricity, cable and maintenance, will the mortgage lender still deduct the 14 cent x sq. footage amount? Would they use some other calculation? Thanks.
    Reply to Tom
    - Michael Branson
      November 26th, 2020
      
      Hi Tom! There is no alteration from this amount. HUD uses 14 cents for all borrowers currently.
      Reply to Michael
Marilyn R Wilson
June 30th, 2017

I have been turned down by All Reverse Mortgage~ the reason Cliff gave was rental income is not considered valid by HUD> this is wrong. In this article it says the rental income may be considered! So why the double standard? Also credit report is terrible since there was bankruptcy almost 10 years ago. By 2018 (next year) this will be off my credit report. I truly believe this was a case of prejudice..
Reply to Marilyn
- Michael Branson
  July 5th, 2017
  
  Hi Marilyn,
  
  The article is correct, rental income may be considered. And I am sorry if you understood the message to you that HUD "will not consider any rental income" when the actual answer is that HUD will not allow us to use any income we cannot verify to their specification. We have never said that rental income is not allowed by HUD but Cliff was correct that HUD has requirements that the borrower must meet for us to be able to use boarder income on the subject property of a reverse mortgage loan.
  There are no double standards and no prejudice as a result, the underwriting requirement is the same for all borrowers. For income to be used, it must be verifiable, there must be a history of receipt and a likelihood of continuance. This is spelled out in no uncertain terms in the HUD Financial Assessment underwriting manual with a separate section for income from boarders. The section stipulates when this income can be used and what documentation is required on page 49 of HUD's Financial Assessment manual in very clear terms.
  As you can see, it does not state that only income from some borrowers can be used without tax returns or that there is a separate class of borrowers from which tax returns would not be required. Such language could be considered "prejudicial" if that were the case. HUD states that for lenders to use rent from boarders in a home, there has to be a current lease and a 2 year history of receipt of the income as evidenced by the borrowers' tax returns. HUD says that rental income from boarders is only (emphasis added) acceptable with the tax returns and the lease agreement. They didn't use the term "should have", or give a number of different options nor do they give different options for different people. The rule is the same for all borrowers.
  
  I cannot get into your specific underwriting issues in an open forum so I will not discuss any reasons for any actions taken on a specific loan here but I would encourage you to contact us if you have questions on any decisions made on your loan if you feel that you have the documentation required by HUD and it was not considered or if you have any questions at all.
  Reply to Michael
Arnold C
March 21st, 2016

Monthly cash reserve, after payments, in my area & family size is $998. Based on our income $3593 and payments under $1800 per month that include property taxes, property insurance, car payments, credit cards, and the "maintenance & utilities" (based upon the schedule provided). Am I missing any types of payments that would be required to list, such as car insurance, cable, medical insurance, telephone, etc. I have been told that the credit cards are figured on the minimum payment (my payments are 1% of balance). Just worried that even though all of above leaves more than the $998, that numerous, large credit card debt would be a problem?
Reply to Arnold
- Michael Branson
  March 21st, 2016
  
  Hi Arnold,
  
  You've got it right - the cable and phone and all the other "goodies" are not contractual obligations and you can cancel them at any time so they are not required to be disclosed or considered in the residual income calculations. And the credit card payments are considered at the minimum payment you are required to make since that is your monthly obligation.
  
  As long as you meet the residual income requirement (that is the $998 you reference for a two-person household and that number changes for more or fewer people), then you meet the income requirement. There is still a credit requirement that HUD has built into the Financial Assessment Guidelines and that pertains mostly to the payment of your obligations in the past 24 months and your overall credit history. If you have paid your taxes and insurance on the home (and any mortgages on the property if any) on time for the past 24 months and your credit is generally sound aside from that and you meet the residual income, you will meet the requirements.
  
  Now let's talk about "what if's". What if you didn't meet the full $998 or if you do meet the income but you have had some late payments. You still will probably qualify for the loan, but may have to have a partial or Life Expectancy Set Aside (LESA) for taxes and insurance. If you do have to get a LESA, it's not the end of the world by any stretch of the imagination and some borrowers have requested them once they learned about them fully.
  
  The LESA sets money aside from the proceeds that are not available to you to pay the installments of your taxes and insurance so you no longer have to pay those installments as they come due. Your taxes and insurance are always paid on time, the money that is set aside is not considered "borrowed" until that portion is actually used to pay the expense. Therefore, you don't accrue interest on the money in the LESA until the lender uses the funds to pay for your taxes or insurance and then you only accrue interest on that portion actually used for that payment, not the entire LESA. Borrowers who do have to get the LESA have only their utilities and home maintenance as expenses from that time on.
  
  But as I explained earlier, if you meet the residual income (you have the $998 or more left after your expenses) and your debts have been paid on time, you don't even need to be concerned about the LESA. It's just nice to know that there are still ways to get the loan even with other issues and the lender should be able to tell you what will and will not be needed as soon as they receive your application and run your credit report. The only questions at that time will be the payment of your taxes and insurance for the past 24 months and your appraised value. If you are concerned about the taxes and insurance because you are unsure about your payment history, they can delay ordering your appraisal until that has been researched as well.
  Reply to Michael
Sandi nolan
December 29th, 2015

I am looking into a reverse mortgage as my full time job is going away and I am going to have to work two full time jobs to make up the money. I'm hoping the reverse mortgage will take the place if one of the jobs so I can relax a bit. What is the minimum job or income requirements to qualify for a reverse mortgage and what is the lowest credit rating required.
Reply to Sandi
- Michael Branson
  January 5th, 2016
  
  Hi Sandi,
  
  HUD does not use Credit Scores and the income requirements are not stringent. Basically, the income required is determined on a process known as the "residual income method" of underwriting. We take all your debts for any loans or credit cards, etc. that you have for monthly payments and add them up to determine the monthly amount of your obligations.
  We then use your "property charges" which include the taxes, insurance, any other costs (HOA dues, special assessments, etc) and add a square footage calculation also that HUD requires to account for maintenance, utilities, etc. After the total costs are tabulated, you must have anywhere from $589 per month for a family of 1 to $1,160 for a family of 4 or more left per month to live on (there are four regions and these are the most expensive numbers, yours may be a little less).
  
  As for the credit, as I stated, HUD has no minimum credit scores but they do look at your credit overall and especially for the past 24 months. If your credit scores are not great but you have paid all bills on time for the past 24 months with special attention to mortgages, taxes and insurance on your home, and don't have any other problems, the credit is not usually a problem.
  If you have other issues like medical collections, they can often be explained with the proper documentation to show that they were out of your control. There are so many ways to overcome credit blemishes that I would always tell folks to let us see what we are working with and see what documentation you have before you get too overly concerned with the credit because HUD even allows us to do a set aside for taxes and insurance in most cases even with derogatory credit.
  If you are concerned, let us go over your particular circumstances with you and let's see if you even have anything to worry about!
  Reply to Michael

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