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Reverse Mortgage Credit Requirements
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Your reverse mortgage questions are answered by All Reverse Mortgage, Inc. CEO & industry expert Michael G. Branson, with over 40 years of experience in the mortgage banking industry.
Answered By Our Experts
If you have a good reason for the delinquencies and supporting documentation, you can still get a reverse mortgage, but the two missed payments would require you to have a set aside account that the lender would use to pay your taxes and insurance as they become due.
The set aside or LESA (Life Expectancy Set Aside) is not a bad deal if the money you are left with works for your purposes. The lender must set the funds aside and you do not have access to those funds so it decreases the amount of money available for you to pay off existing loans or for other purposes but other than that, the money is not considered borrowed until it is actually send to your tax assessor or insurance company to pay an installment due and therefore you are not accruing interest on that money until it is used.
If you move or otherwise decide to pay off the loan before you use those funds, you never borrowed that portion of your line, so they do not need to be repaid. And best of all, you don’t ever need to make your payments of taxes or insurance again because the lender is doing it for you, and it doesn’t cost you any more money.
No more worrying about where you need to find the money to pay your taxes or insurance when they are due as the lender pays them for you from the loan proceeds and this is one more headache you don’t have to worry about.
With a good explanation on the lates and overall good credit and qualification otherwise, you can probably still get the loan, but you will probably need to have a LESA which is a set aside to pay for taxes and insurance established with your loan proceeds.
This is a HUD requirement when borrowers have delinquent property charges in the past 24 months (mortgage payments, taxes, insurance, HOA dues, etc.) and it lessens the amount of money available to you from the loan as this money is set aside to pay your taxes and insurance in the future. However, other than the fact that there is not as much money available to you from the loan, it’s not a bad thing.
The loan proceeds are set aside to pay your taxes and insurance and that means you don’t ever need to come up with the cash to pay your taxes or insurance from that point on and so that is one less stress in your life. The money is not considered borrowed until it is used to pay those assessments and then only the amount used for the actual tax or insurance payment is added to your amount owed when paid so you do not accrue interest on the LESA portion of the loan until the money is used to pay your taxes or insurance (and then only on that amount).
If you pay off your loan early, any money left in the LESA was never borrowed so it does not need to be repaid. For example, if the lender established a LESA account of $25,000 for payment of future taxes and insurance for you but you pay the loan off early because you decide to move and the lender only used $5,000 of the LESA funds to pay your taxes and insurance, the additional $20,000 that was set aside was never used so you never accrued any interest owing on it and when you pay the loan off, the amount you must repay would not include that remaining $20,000 because you never borrowed those funds.
Some people choose to have a LESA even when it is not required just so they never have to worry about taxes or insurance again. The only thing you need to remember when you voluntarily establish a LESA account is that if you do set up a LESA account, you cannot change your mind later. If it is required as a condition of the loan, you would not have the option to include or exclude the LESA account later anyway. It will remain with the loan for as long as the loan is active.
Lenders will run a standard, tri-merge credit report that shows the credit from all three major credit repositories. Anything that is on those reports will show on the report the lender receives. They are most concerned with your pattern of credit payments and your most recent 2 years’ payments of all property charges (taxes, insurance, HOA payments-if any, etc.).
If borrowers have no late property charges in the past 2 years and their credit history does not show a pattern of late payments, there is typically nothing to worry about. Your credit does not need to be flawless but a history of habitual late payments over a longer time period, especially property charges, would probably warrant a set aside to pay your taxes and insurance from the new reverse mortgage.
If your derogatory credit is all within certain time frames and can be shown to be caused by circumstances beyond your control (loss of job, injury, etc.), you may also be able to resolve it with supporting documentation and a good letter of explanation explaining the circumstances. You should always let your lender know what the cause(s) were so they can tell you what can be done.
If the Chapter 13 is completed, there is no time period required. Your payments must have been made on time but there is no waiting period required.
If you have filed but it has not been completed (Discharged), you must have at least 12 months on time payments and you will need approval from the court.
A LESA is a Life Expectancy Set Aside where funds are set aside from the proceeds of your reverse mortgage for the lender to pay your taxes and insurance as they become due. It is usually something that is required as a result of the borrower’s failure to pay past obligations in a timely manner or when their income is a little lower than would be required for approval without the presence of the LESA. However, some borrowers actually prefer a LESA and opt for it voluntarily.
The LESA funds are not considered borrowed funds until the lender actually sends them to the tax collector or the insurance company for payment of that installment so there is no interest accruing on the funds that are not being used, only the funds that are actually paid out as they are paid.
Borrowers with a LESA do not need to worry about a tax or insurance default on their loan and they are not concerned about those payments coming due when they may not have the funds available. The one thing you do need to remember is that if you opt to set the LESA account up voluntarily, you cannot change your mind later and eliminate the account.
You can use the funds for anything you wish, including paying off other loans/debts. The lender must disburse all funds to you though and you can use them to pay off other creditors, they cannot pay them directly.
I’m not sure what you mean by a “second reverse mortgage” though. You can only have one reverse mortgage at a time and if you already have one, you can possibly refinance it if you qualify but cannot get a second reverse mortgage on another home.
Also, when it comes to revolving credit, if there are balances on the cards at the time you close the loan, you must be able to qualify with those payments (but qualifying for a reverse mortgage is generally much easier than other types of loans if you meet the residual income requirements which are easier to meet than typical ratio requirements used by other loans).
Borrowers have several options with reverse mortgages and to be able to get the loan without having to set funds aside for the payment of taxes and insurance under the HUD financial assessment guideline requirements, you must have paid all property charges for at least the last 24 months on time. This includes payments, taxes, and insurance on all owned properties.
This means that if your credit is overall satisfactory and you have paid all housing expenses on time, you would qualify on the credit requirements (HUD does not impose minimum credit score requirements, just that you are generally sound in your credit paying habits).
However, to be able to get a reverse mortgage without having to augment with additional cash out of pocket to close the loan, you need to have a fairly low loan in relation to the value of your home. In other words, you need a stronger equity position.
Because you do not ever need to make a mortgage payment for as long as you live in the home after you close a reverse mortgage, the loan does not start at a very high loan to value. The youngest eligible borrower is age 62 and that borrower starts at a loan that is about 50% of the value of the home.
As you get older, the amount you receive goes up in relation to the value of the home. The reason for this is because based on actuarial tables, at 62-year-old will be able to live much longer and accrue more interest on a home than an 87-year-old borrower in most instances.
The HUD program does not go further into factors that might affect borrower longevity like life insurance might, it uses only borrower age to determine the amount you receive. In any case, your equity position would prevent you from getting the loan even without the late payments.
There are some liens that do not take precedence over a valid mortgage lien and some that will take priority (such as property taxes).
To determine the priority of any particular lien, you should check with a title company or title attorney.
Reverse mortgages do not have a minimum credit score requirement.
They do look at your overall credit history and willingness to repay obligations and if you have credit lates, your explanations for the delinquencies.
The HUD program is especially concerned with your property charges over the past 24 months (any mortgages, taxes insurance and HOA dues, if any).
There are also ways to overcome many credit issues with reverse mortgages so I would encourage you to contact a loan officer and let them review your circumstances with you if you have any questions or concerns before automatically thinking you would not qualify.
Even with not so stellar credit many borrowers are able to get a reverse mortgage – some with and some without the requirement to set funds aside to pay taxes and insurance.
The Life Expectancy Set Aside (LESA) for taxes and insurance is actually a pretty good deal if the amount of the remaining benefits will work for your needs.
You don’t accrue interest on the funds until the lender actually uses them to pay your taxes or insurance and if you sell or pay the loan off early, you only repay the amount of money you actually borrowed (plus an interest that accrued on that amount).
You can go to our calculator is not able to tell you what your LESA will be so after you receive the proposal showing your benefits, be sure to contact us and let us know about the credit issues so we can be sure we let you know how that might affect the funds available to you based on your circumstances.
If your credit is too bad, you could be declined for the loan. However, the chances are if you qualify in all other areas that you can still get the loan but with a set aside to pay the taxes and insurance.
This is known as a Life Expectancy Set Aside where funds from the loan are set aside to pay for the taxes and insurance on the home for your life expectancy. If you are in the state of Texas, the loan cannot be made to borrowers where one spouse is under the age of 62.
However, in other states, the younger spouse would not be on the loan but would be considered an eligible non-borrowing spouse and would also be protected and allowed to stay in the home for life if something happened to the older spouse.
The one thing you need to consider with non-borrowing spouses is that even though she can remain in the home, if you were to pass while there was still money left on the line of credit, she would not have access to those funds since she is not a borrower on the loan.
Credit is not going to be an issue in this case because you cannot add anyone to a reverse mortgage that has already closed.
Once a reverse mortgage has closed, no other borrowers may be added to the existing loan regardless of their qualifications.
The only way your parents could add you to a reverse mortgage on their property would be to add you to the title and then take out a whole new loan with you as one of the borrowers if you are also living there.
At that time, yes, you would need to meet the current HUD parameters for income, credit, age and occupancy.
If the project is on HUD’s approved condo list (you can find that information here) then the HUD rules will allow you to pay the back taxes and assessments with the loan proceeds but the bigger question will be CAN you?!
Depending on the value of the home and the cost of the taxes and assessments, HUD will require you to establish a Life Expectancy Set Aside (LESA) account to pay taxes and insurance in the future. Depending on the amount of the taxes and insurance, the LESA account can be substantial.
This is not a fee; it is an amount of the loan proceeds set aside to pay these expenses in the future so that they are never late again. If the numbers work for you, it’s actually not a bad way to go.
The taxes and insurance are paid from the account and the money is not considered borrowed until the lender uses them to make a payment and so they do not accrue interest until they are used to pay a payment.
And since there are never any prepayment penalties with a reverse mortgage, if you choose to make payments on the loan at any time in the future to keep the balance from rising as a result of payment of taxes and insurance, you may do so at any time.
As I said though, the only question is if your equity will pay all the back assessments due plus establish the LESA account. I would encourage you to visit us at https://reverse.mortgage/calculator and let us run some additional numbers after you view the initial numbers available on the calculator with the LESA account to see if this is a viable alternative for you.
A loan modification does not necessarily eliminate you from eligibility. The things that the lender will be looking at will be when the modification was completed and what was your payment history before and after the modification.
Many people have come to think of modifications as bad things but that is not necessarily true in all cases. Just like any other credit decisions, the lender will look at your overall credit history with a careful review of the past 24 months.
It could be that you will be required to provide an explanation of circumstances that were beyond your control and documentation, and it could also be true that you will be required to have a LESA (Life Expectancy Set Aside) account on your loan to pay taxes and insurance depending on the circumstances but most borrowers are still able to get the loan if they qualify in all other aspects and their overall credit profile is acceptable.
While credit scores are not one of the criteria that is considered when determining eligibility for a reverse mortgage, lenders are required to review the overall willingness and ability of the borrower to repay obligations and property charges in a timely manner.
For this reason, lenders must run and analyze credit for every reverse mortgage borrower, even if the requirements are not as stringent as standard or forward loans.
HUD only implemented financial assessment guidelines within the past 5 years. Prior to that, they did not review credit or income of borrowers for requirement of the loan. Unfortunately, too many borrowers defaulted on other property charges (taxes and insurance) which do lead to unusually high losses to the program as those losses were not taken into consideration when determining the amount to give borrowers.
HUD was forced to implement financial assessment guidelines which now take into consideration borrowers’ ability and willingness to pay obligations and property charges, even after they receive their reverse mortgage.
With this being said, in most cases, even with delinquent obligations borrowers are not typically rejected for a reverse mortgage but are required under HUD rules to accept a LESA (Life Expectancy Set Aside) which are funds from the loan set aside to pay the taxes and insurance as they become due. The funds are not considered borrowed and do not accrue interest until used to pay the taxes or insurance.
Purchase transactions are the exception to this policy as HUD feels that a borrower must show that they can handle the property obligations on their current property before they will insure a loan on a new property. In this case, the borrower would be required to have at least the last 24 months on time payments of all property related charges.
The lender only has the authority you grant to them when you sign your loan documents and you always own the home. I would recommend that you go back and review your Note, Deed of Trust and Loan Agreement to verify specific terms.
The lender can never just kick you out of your home. There are limited reasons that create a default on the mortgage that include not living in the home as your primary residence, not paying your taxes and insurance, and letting the property fall into disrepair.
Even then, the lender would be required to notify you of the reason for the default and there are procedures that must be followed to allow you to remedy the default if possible or to pay the loan off prior to the date of the foreclosure.
Filing a bankruptcy is not one of the default reasons. That means that under the stated terms of the loan, if you file a BK, the lender cannot accelerate your loan and require an immediate payoff of the loan. A BK can have other effects on the loan though.
If you file bankruptcy, it would delay the payout of further reverse mortgage proceeds though until such time as the lender can determine what the court approves so it would disrupt any payments you are receiving or expect to receive from your loan, at least temporarily.
It would not be grounds for calling the Note due and payable though and as I stated previously, since you always own your home, there is never a provision for HUD or the lender to just “kick you out” of your home unless you default on the terms and then they must follow all applicable laws.
A reverse mortgage is a loan secured by a lien on the property that is in first lien position. This means that any other liens filed by other creditors against the property after the reverse mortgage would be subordinate to the prior lien.
I would have to suggest that you contact an attorney who practices in the state in which the property is located to give you counsel about the rights of other lienholders. I honestly do not know what rights the judgement holder may or may not have in your state and I would doubt that any loan would shield you from other judgements.
There may be a hesitancy on the part of the other lienholder to try to enforce the lien with additional action prior to your ultimate sale of the property (if they even have that right in the first place) due to the priority of the reverse mortgage and what that would require of them though and this would be something to discuss with your attorney.
I don’t think it’s ever a waste of time to get a second opinion! Sometimes it takes additional documentation that one lender may not have considered. I would recommend you check with a second underwriter and let us know if we can help.
We have done many for borrowers in Chapter 13. The HUD rules are that you must have at least 12 months of on-time payments and that the Trustee must approve the reverse mortgage among other credit requirements. We have not been involved in a transaction yet that the Trustee did not approve the loan but each instance, the reverse mortgage made a lot of sense for the borrowers. I don’t think it is an automatic approval by any stretch of the imagination, but I think if it makes sense for your circumstances you will not find it too difficult.
The short answer is yes you can, but there are still credit and income requirements and the loan are still underwritten for creditworthiness. In other words, it will depend on whether the BK was recent, if you are still within the BK itself, the reason for the BK and if you have any late payments on credit or property charges since you had your BK. The BK will not in and of itself eliminate your ability to get a reverse mortgage, but the lender will be looking to see that the reasons for the BK were largely beyond your control (medical, loss of job or death of immediate family member, etc.).
They will also want to be sure that there are no derogatory credit items after the BK which means that if you entered a BK, you cannot have made additional late payments after that time. Furthermore, if it is a Chapter 13, you can still be in the BK if you have been making on time payments for a minimum of 12 months and the BK court approves of your reverse mortgage.
If you decide to apply for a reverse mortgage after a BK, be sure to disclose this fact to your lender so that they can run your credit immediately and together you can get all the information together to determine if the loan will work before you spend a lot of time and money for an appraisal if there is any concern that the loan might not be approved, especially if you are looking at a purchase reverse where the credit requirements are a bit tighter.
Sad to hear. Any judgement by the bond would be junior to the reverse mortgage and would not affect the loan. The lender is in a 1st lien position so anything recorded after that does not adversely affect their position. About the Bankruptcy, it would affect any payments available to them but you’re saying they have no money left to them on the loan anyway so that would be a moot point. I would suggest that you have them contact the servicer and discuss with them in advance their plans and get assurances that there are no issues and that would certainly ease their minds as well.
Very possibly, but it will depend on the reasons for the foreclosure, your documentation and the rest of your credit as well. I would suggest that you check out the calculator on our website and know that likely you will need a Life Expectancy Set Aside (LESA) for the payment of taxes and insurance and see if the amount you can expect from the loan will work for you with the LESA.
You can never have a re-evaluation done on a home. If you choose to refinance the loan, it would be a whole new loan and they would do a new appraisal on the property establishing the current value at that time. If you can substantiate the medical issues and if all other credit is ok (your taxes, insurance and any other property charges such as HOA payments, if any) have all been paid as agreed, then your issues during the medical problems may not impair you at all.
You would have to write a letter of explanation regarding the circumstances and any supporting documentation you can supply to show that the delinquent obligations were beyond your control and were a result of the medical issues would also help.
Based on the circumstances you have outlined, it is very likely that you would have to be able to document that the delinquencies were due to extenuating circumstances that were beyond your control. You would probably be required to have the Set Aside for payment of taxes and insurance but that’s very hard to say for sure without having all the documentation. The rules that HUD will require the lender to follow for a borrower currently in credit counseling is that you must have a 12-month history of on-time payments and the underwriter will require a letter from the credit counseling agency approving the reverse mortgage in your case.
I cannot tell you specifically what documentation will be required because I don’t know that circumstances. Just remember though that the under the Financial Assessment requirements, lenders do have to qualify borrowers both with income and credit qualifications for reverse mortgages. The better you document things and the more plausible the situation for a one-time issue that was out of your control and that will not reoccur, the more likely the chances for approval.
Borrowers who are unable to meet obligations due to a job loss, sickness or death in the family are more likely to receive approval than one who chose to let a home go to foreclosure due to financial considerations. Underwriting is all about history and likelihood of continuance. You want to be able to show that your history is that you paid your obligations in a timely manner up until a specific instance that was beyond your control that interrupted that good payment history and that your ability to pay your obligations now is likely to continue as the reasons for the disruption in the past is now gone.
Yes, you absolutely can. Some reverse mortgage lenders are better at working with credit issues than others and we have been able to do loans for some folks who have been turned down by other companies once we dug into the situation and got all the facts and verification. There is no way to promise anything, but by knowing what will and will not be accepted, we can let you know quickly what we can and cannot do.
It is important for borrowers to be as forthcoming about credit issues as they can from the start. It really helps to know everything we must work with from the immediately so that we can be 100% honest with you upfront. Many borrowers take a “wait and see” approach and then are shocked when their loans do not go through (and I am not saying you did).
Let’s face it, talking about credit issues and tough times are never fun, but by knowing what we must work with we can often help you better. If we know everything up front, we can discuss mitigating circumstances that are acceptable to HUD and whether your circumstances will ultimately meet their requirements.
If you continue to pay your property charges on time (taxes, insurance and any other property charges), you follow your reverse mortgage terms and conditions. If you enter bankruptcy at any point that could disrupt payments due to you until the decision by the court to exclude the property but even then, it’s usually only a temporary issue.
I would strongly suggest that you contact a licensed attorney who specializes in debt issues if you have specific questions on how defaulting on the debt may affect other issues or what rights you must avoid that eventuality.
If you have been late on your mortgage, taxes or other property charges (HOA payments, property insurance, etc) in the past 24 months, you may be required to have a set aside established for the payment of taxes and insurance. However, there is no set time you must wait before you can get the loan.
You must be able to prove that you are financially able to meet your obligations and meet the financial assessment that HUD requires of all borrowers and so if you had extenuating circumstances that forced you to make some payments beyond the due date but have taken the steps to eliminate the causes and your overall credit is sound, you should be fine.
Underwriters take all this into consideration especially if the reverse mortgage will also help you with that goal, but you don’t have to wait any amount of time before you get the loan unless you want to be sure you don’t have to have funds set aside and then you would need at least the last 24 months payments paid on time.
HUD has no minimum credit score requirement, however, they do require lenders to conduct a credit assessment. If your score is low but your recent credit is acceptable or you have verifiable reasons for the credit issues showing those things that caused the credit issues were beyond your control and not likely to recur, you should still be able to get the loan. In some cases, you may have to have funds set aside from the loan to pay taxes and insurance, but that’s not always required and you never know until you fill out an application, let us run your credit and see what we can do!
If you have been delinquent on mortgage payments, taxes or insurance in the past 24 months, HUD requires lenders to establish a LESA account to pay taxes and insurance for life. A LESA is a Life Expectancy Set Aside to make those payments as they come due. If your property is truly tax exempt and not just deferred, then the back taxes would have to be paid and just the insurance would be used to determine the set aside amount.
If the taxes are deferred though, HUD does not allow borrowers to use a deferral and obtain a reverse mortgage and the taxes would have to be paid annually and therefore, also considered in the LESA amount. With a true tax exemption, your LESA would be minimal assuming your insurance is not high and if your remaining credit is ok, then it should not be a problem to get the loan closed.
Under these circumstances you will be required to have a Life Expectancy Set Aside for the payment of taxes and insurance but there is still a good chance you can still get the loan if you qualify in every other way. The only way to know for sure is to give us a chance to run the numbers with the Set Aside and make sure they work for you and then start the application and run credit if they do and review the credit in full before we do anything else to be sure we are not wasting any of your money on appraisal, etc. if it won’t work. You never know until you try.
I’m not sure from which perspective this is coming. Do you already have a reverse mortgage or are you contemplating one? If you have paid your property taxes late in the past 24 months and are looking to get a new reverse mortgage, HUD would require the lender to give you what they call a Life Expectancy Set Aside (LESA or “Lee-Sah”). In the case of borrower’s with the LESA, funds are set aside from the loan and then the servicer would pay the taxes and insurance as they become due from then on after the loan closes.
The drawback for borrowers with a LESA is that they do not have as much money available to them on their reverse mortgage. If your taxes and insurance are high and you are at or near the bottom of the eligible age limit (62), the LESA amount can be quite high because the amount that would have to be paid is higher and there would be many years of payments to be set aside. Conversely, if you were well above the minimum age of 62 and your taxes and insurance are minimal, the LESA would be very low.
The LESA is not money that is borrowed and then set aside some bank account. It’s not like a bank account that they establish for you with your borrowed funds. It is money on your line of credit that you have not borrowed yet and are not considered borrowed funds until the lender actually sends money on your behalf to your tax authority or insurance company. For example, suppose you have a LESA of $25,000 for payment of taxes and insurance. You are not accruing interest on this money because you haven’t borrowed it yet and it is not part of your outstanding balance.
It’s more like your credit card maximum available balance of $25,000 that you haven’t used yet. It’s a credit line that can only be used to pay your taxes and insurance and you owe nothing on it until it is used for that purpose. When the first bill of $200 comes in for the first installment of taxes, the lender sends in the payment for you and only then is $200 added to the amount you owe on your reverse mortgage.
If you pay off the loan early, there is no “refund” due to you on the LESA account because it’s money you never borrowed and therefore, it’s not included in the amount required to pay off the loan. Many borrowers end up liking the LESA and some have voluntarily requested the account. This way, they never have to budget for or pay the taxes and insurance again.
The second perspective from which your question may be coming is if you already have a reverse mortgage. The documents you signed stated that you agreed to the fact that you would pay your taxes and insurance on time. Failure to do so is a default under the terms of the loan. Having said that though, the degree to which you are delinquent will make a big difference.
I can’t tell you what your lender will allow or not allow and would suggest you contact the servicing department if you feel that you are getting into dangerous territory on the delinquency. Don’t sit back and wait for them to contact you if you are later than just within the month the payment is due.
You would not be able to just remove your wife from the transaction. Since you are a married borrower on a reverse mortgage transaction, your wife would also have to be considered. There is a step with all HUD HECM loans wherein lenders have to do a CAIVRS (HUD’s online Credit Alert System) check for all borrowers to determine whether or not borrowers are in default on a federally insured loan or have a deficiency balance on a prior federally insured loan. Borrowers who come back with a CAIVRS hit indicating an outstanding loss or balance owed are not eligible for another government insured program until they clear the delinquent amount from the first loss.
Once you already have your reverse mortgage, there is no restriction on you regarding any other credit you obtain. Just like any loan, the lender underwrote your creditworthiness at the time you applied and hopefully you will remain as diligent about staying within your ability to repay your obligations after you obtain your loan as you were before you closed your reverse mortgage, but any subsequent credit you obtain is your decision.
The HUD HECM reverse mortgage does not require any specific credit score but HUD does have a financial assessment component to the underwriting. I can’t tell you if you would be approved or not unless we could see why the credit score was as low as it is.
I would invite you to visit our calculator and first see if the amount you might expect to receive would work for you (remember, with credit issues, you would probably be required to have the set aside to pay taxes and insurance but that’s not always a bad thing either).
There are some things we can work with as some things might more drastically affect your credit score than it does your reverse mortgage approval. The only way we would know for sure is to take a look at things and let you know.
If the loan is a purchase, there is a two year time that you must wait but if it is a refinance, there is no time period that must pass as long as the bankruptcy is totally discharged and closed. If the loan is a purchase, during that two-year period, there can be no further delinquencies on your credit. In either instance, there should be reasons for the BK that are beyond your control that can be verified (illness, death in the family, job loss, etc). The lender will be looking for you to demonstrate that not only were the circumstances beyond your control, but that they are not likely to reoccur causing you to have problems meeting your obligations once you have a reverse mortgage.
With the Financial Assessment guidelines that HUD now uses, if borrowers have been late on home obligations in the past 24 months (mortgage payments, taxes, insurance, etc) it may not prevent you from getting the loan but probably will require the lender to establish a Life Expectancy Set Aside (LESA or Lee-sah) for the payment of your taxes and insurance in order for you to qualify for the loan. The amount of the LESA will depend on the age of the youngest borrower and the amount of the taxes and insurance. The younger the borrower and the higher the taxes and insurance payments the higher the LESA will be.
Some borrowers actually prefer the LESA because it means they never have to worry about paying the taxes or insurance payments again – the lender does it for them from the reverse mortgage proceeds. The borrower does not accrue interest on the funds until the lender actually makes the payment so it does not cost the borrower anything to have funds in the LESA account and they are only considered borrowed funds once the lender actually sends a check to the tax assessor or the insurance company on the borrower’s behalf.
Some borrowers cannot work with the LESA requirement because the amount would make them short to close the loan between the amount required to set aside plus any loans the borrower has to pay off on the home already. In any case, borrowers are much better off with their reverse mortgage qualification if they are and have been current on all obligations concerning the home, or if any late payments are well-documentable as being isolated and beyond the borrower’s control (i.e. loss of job, injury or death, etc).
The LESA on the HECM product is the only one that grows. This amount grows at the same rate as the line itself on the unused portion of the line and at a rate equal to the interest you are accruing plus the Mortgage Insurance Premium (MIP) accrual rate. So if your interest accrues at 2.5% and your MIP accrual is at .5%, then the amount in the LESA account is growing by 3%. If the LESA account had $30,000 in it, it would experience $900 growth assuming none of the money was removed which it will be as money is needed to pay taxes and insurance. There is no interest being paid to you on the funds in the LESA account. You don’t earn any interest on loan proceeds you have not yet borrowed, but you also aren’t paying any interest on money that you haven’t borrowed yet either. You only begin to accrue interest on the funds as they are used to pay your taxes and insurance.
The jumbo programs are a bit different. They currently don’t have a growth feature on the funds in the LESA account. Here again, you are not paying interest on funds you have not yet borrowed so you are not accruing interest until the lender actually has to send money to a third party on your behalf, but there is no growth in the funds available to you. Although there are several new programs rumored to be coming out in the very near future and things may change, currently borrowers who need a LESA to qualify for the jumbo program are required to pay a slightly higher rate due to the increased servicing functions on these loans.
It is interesting to note that when the HECM reverse mortgage was first introduced, they required borrowers to pay a monthly servicing fee of up to $35.00. Most lenders eliminated the servicing fee on the HECM reverse mortgage over the years but that was before the implementation of the LESA program. It still remains to be seen if a monthly servicing fee will reemerge in the future for loans requiring servicers to administer the LESA account and to pay borrowers’ taxes and insurance.
Have you spoken with your servicer yet? I don’t know what your insurance coverages are but I know that the lender cannot expect you to live in a home that is underwater so they would work with you to help you file claims and make sure that the home is habitable as soon as possible and also with temporary housing. Remember that your insurance is probably written so that the lender is a co-insured on the policy and you will need their cooperation to receive the claims and it is never too early to begin the dialogue.
Whereas it certainly helps, being delinquent won't necessarily keep you from being approved for a reverse mortgage. The chances are good that you will have to get a set aside to pay future taxes and insurance, but I would certainly tell you it is worth looking into, especially if you have extenuating circumstances for the delinquency and can supply documentation to support that the situation was beyond your control (i.e. health issues, loss of job, death in the immediate family, etc). Please reach out by calculating your eligibility here. We'll be happy to pre-qualify you!
HUD does not have credit score minimums but they do require borrowers to meet their financial assessment requirements. That means they do not require you to have a score over any certain amount but they will look at the circumstances that lowered your score.
For example, if you had credit issues many years ago due to verifiable health or business reasons beyond your control and you never reestablished your credit, you would have a low credit score but if you have no recent credit issues and pay your taxes and insurance on your home on time, probably would be able to get the loan with no set aside. If you have paid my your recent credit late or taxes and insurance payment late in the past 24 months, they would at a minimum have to set money aside to pay them.
The only way to know if your credit will ultimately disqualify you for the program entirely is to let us take a look at your actual credit, see what shows and determine if it will work.
If she does not sell the home and leaves the home before she passes, then it would be a foreclosure or a Deed in Lieu of Foreclosure. However, reverse mortgage servicers are experienced with working with borrowers who have to leave their home, nonetheless. She should contact the customer service number on the statement she receives and let them know of her circumstances and work with them toward a satisfactory resolution. She may find that they don’t even report to credit bureaus (many do not). It would prevent her from obtaining another HUD insured/guaranteed loan as long as there is a balance outstanding but it may not have any other impact at all but the first step is to contact the servicer.
Your maximum benefit amount is based on your age, property value and interest rates. The amount you owe does not effect your eligibility but your maximum loan amount does not increase if you owe more than the HUD program will allow. If you are short to close, the only way to do the reverse mortgage would be for you to bring in the funds needed to cover the shortfall. For example, if based on the HUD calculations you are eligible for a loan amount or Principal Limit of $200,000 and the costs and existing mortgage you have now total $210,000, then to get a reverse mortgage you would have to come in to closing with $10,000 in order to close the loan.
With regard to qualifying with the credit cards, HUD uses a residual income method to qualify borrowers. In other words, as long as you have the required amount of monthly income after payment of all monthly obligations, then your credit cards will not matter. There are also ways to use savings to offset income deficits as well so the only way to know for sure if you meet the HUD requirements would be to visit our site and check out your circumstances on our real-time calculator. There is no hassle and no obligation.
Firstly, a solitary late on a credit card would not disqualify you from getting a reverse mortgage. If that really was the only issue, you should have checked with other lenders. If he is not living in the home now though, he would be considered a non-eligible, non-borrowing spouse. Because you are married, he will still be part of the transaction and will be required to do some of the paperwork and attend counseling so he knows his rights and obligations, but it will be primarily you that the lender would be looking at as for the loan. He can stay on title, however, if something happens to you, the loan would be called due and payable and he would have to either pay off the loan with funds available to him, refinance the obligation in his name with a new loan or sell the property to pay off the loan.
Yes you can, but the ease of that transaction will depend on the paperwork you have from the sale and when it took place. Many owner-financed sales still go through escrow or title services and have closing statements available which document the sales prices and when the sale took place. Some are not so well-documented. If yours was one of those transactions where things were all done on a “handshake” and nothing was recorded at the time the sale transpired, then it will depend on the documentation that you do have as to what the lender will need for the loan, if it can be done at all. Unfortunately, without knowing what you have and don’t have, I can’t tell you what you will need to complete your loan but if you have a closing statement from the time you purchased and have been living in the home for more than a year making payments to the seller and can document your payment history of on-time payments (and you qualify under HUD’s financial assessment guidelines and normal program parameters of course), then you should be just fine.
HUD has always required a credit report for the reverse mortgage program, even when they did not have a financial assessment feature as part of their underwriting. Prior to 2014, the underwriter’s used the credit report to determine the borrower’s overall creditworthiness and to help determine whether or not there was going to be any issues with delinquent federal debt, etc. After HUD instituted the financial assessment guidelines, underwriters now have to determine borrower’s ability to qualify both with their income and liability situation as well as with their overall creditworthiness. Some borrowers whose ability to handle their finances may not warrant outright approval, but may still be able to qualify for the loan with a Life Expectancy Set Aside (LESA or “lee-suh”) to pay for their tax and insurance payments as they come due. Since the credit reporting guidelines changed and some public record items no longer show on your credit report it no longer shows as complete a picture as it once did, but it does show mortgage payment history, total monthly debts and other information that the originator needs to determine whether or not you will meet the HUD parameters and ultimately that the underwriter will use to approve your loan.
They can never "evict" you, they don't own the home, you do. However, you agreed to pay other items that can become prior liens and if the lender has to pay them to protect their interest in the secured property, just like any loan, the lender can eventually begin foreclosure proceedings to force payment of the liens or loan.
You need to consult with your attorney. The reverse mortgage is a loan and gives you no more vulnerability or protection than any other loan. An attorney can tell you what your rights are.
We would probably have to have the Life Expectancy Set Aside (LESA) to pay the taxes and insurance but many folks actually prefer the LESA and with the documentation to show the circumstances you outline below, I am very confident we can still get the loan approved.
HUD writes the rules on financial assessment but it is up to each lender to underwrite the loan to determine if it meets the program parameters. Without seeing the payment history, the letter of explanation, your documentation and other credit, there is really no way to answer this for sure. I would certainly recommend that you get a second opinion. Let us see what you have and we will be happy to see if we can help. Your circumstances may be such that HUD won’t allow us to consider compensating factors, or maybe there are none that we can use, but then again, maybe there are and we can. At any rate, you never know until you try and if you use my online calculator and submit your information, it doesn’t cost you a dime to find out.
It’s not a sure thing, but if you have paid all payments (mortgage, taxes and insurance) relating to the property on time and the late payments have a good explanation and are all around one period of time, the chances are you may be fine with no restrictions on the amount you receive. You may also be required to set funds aside from the loan to pay taxes and insurance (which many borrowers really like and do voluntarily). But the only way to know for sure is for your lender to run the credit and review your explanations.
They certainly can. If the loan was a federally insured loan, there is a good chance that the borrower will not clear the HUD system due to the fact that it will show an outstanding loss. HUD will not allow another government insured loan to a borrower if the borrower is in their system showing outstanding amounts owed on previous loans that were never paid (unless the loans were forgiven not written off as a bad debt and I don’t know if that is the case with yours when you say due to disability).
Absolutely! There are some “guidelines” and there are some hard and fast rules when dealing with HUD loans. There are some things that HUD says a lender has to do or warrant that may leave the lender some wiggle room as to how they gather and interpret the information to make those warranties. There are also different levels of experience from lender to lender and even underwriter to underwriter at the lender’s office. I would definitely suggest that you speak with another lender if you have been told you cannot get the loan.
Having said this, I would also suggest that you are completely straight forward with the second lender about the reason(s) why the first lender said you did not qualify. If the reason is something that is a hard and fast rule (such as your property does not meet HUD requirements or there is an external influence that HUD absolutely will not allow such as power lines that are over your home or your property is located too close to large propane or gasoline tanks for example), then the second lender can save you a lot of time by confirming this information. If it is something that deals with income or some other aspect that may not be as finite and is possibly a bit more subjective based on lender or underwriter interpretation of HUD requirements, you may be able to get a more positive outcome with a different pair of eyes looking at the information.
If it is an actual judgement on title, it would have to be paid off because it would have a superior lien position to the reverse mortgage. Also, HUD requires that the reverse mortgage be in first lien position with no other liens on the property at the time the loan closes so any judgements/liens that appear on title would have to be paid in full in order to obtain a reverse mortgage.
Credit scores are not as important as overall credit histories and more importantly your past 24 months' credit history on your mortgage, taxes and insurance payments. If you have any questions about specific credit issues, please don't hesitate to give us a call so we can discuss specifics with you.
If your son is the co-owner, he would have to also qualify for the loan and authorize it or sign the home over to you and come off of title. But even then, the current status of the default could create an issue that you need to resolve quickly and would probably require you to get a set aside for the taxes and insurance. At any rate though, the answer to your question is no, you cannot take out a loan without the co-owner of the property's knowledge or approval.
I suspect that the impounds they mentioned is the HUD LESA or Life Expectancy Set Aside for taxes and insurance. Without seeing the extent of the credit, I have a hard time making any kind of qualified statement but it would not be uncommon to see this kind of a provision based on HUD's new financial assessment guidelines with credit issues (a bankruptcy and foreclosure proceedings) within the past 24 months.
As long as the foreclosure was not an FHA insured loan that resulted in a loss and you have re-established your credit and it has been clean since then, you should be able to get a reverse mortgage. You would have to write a letter of explanation and the BK and foreclosure should be the result of something that was out of your control and not just because property values trended downward and you didn't want to keep paying, but with any reasonable explanation you should be fine.
Your loan being modified does not impede the reverse mortgage process, your payment history of any loans on the property, the taxes and insurance and your overall credit will be reviewed and could have an impact on the terms of your reverse mortgage though. Many folks for whom we have closed reverse mortgage loans had obtained loan modifications at one point or another in the past so I would invite you to contact us with the specifics and we would be happy to go over your credit history as it relates to HUD's Financial Assessment Rules.
HUD requires 3 years for a purchase transaction and as long as the loans on which you had the two properties were not FHA-insured, they are not automatic declines. They are both over 24 months so they are not even automatic set asides to pay for taxes and insurance under HUD Financial Assessment guidelines, but a lot will depend on the reasons for the defaults. You will still have to fully explain the circumstances and document the things that were beyond your control that created the need for the short sales.
It will be the nature of the circumstances and the documentation that will determine what steps would then need to be taken to do the loan. All other credit including the payment of the mortgage (if any) and the taxes and insurance on your home should be on time for a minimum of the past 24 months.
The answer is not a straight yes or no. You can do a loan for a borrower who is currently in foreclosure under the following circumstances:
1) The existing loan cannot be an FHA loan
2) The borrower still has to qualify under the Financial Assessment guidelines for income and credit
3) The borrower will receive a set-aside requirement to pay taxes and insurance
This means that the borrower's other credit must be over-all ok without any glaring issues or the borrower may not meet the credit criteria. They must meet the income guidelines established by HUD and so you would need to contact us to determine acceptance based on the borrowers' income and liabilities. The lender would set money aside out of the reverse mortgage to pay the borrower's taxes and insurance which means they would not receive as much money for loan payoff and other uses in the loan as even a comparable borrower who was not in default on their current mortgage. To determine the amount that they would receive, a lender would have to get all the information including the borrowers' monthly or annual taxes and insurance on the property and then they can determine the amount of money available to pay off the existing mortgage and for the borrwer for other expenses, if any.
You are not eligible for another FHA insured loan until more than 3 years have passed since the date the FHA claim for loss on your last home was finalized through the FHA system. So you may be eligible in 2018 and you may not depending on when the whole loss was finalized through the HUD system. That is not just when the property was foreclosed or sold through a short sale but when all the final claims were submitted to and paid by HUD to all interested parties. This can sometimes take a few months and we have sometimes seen this take over a year to complete.
The HUD system is known as the CAIVRS system (Credit Alert Verification Reporting System - yes I know, there is no "I" word as in the acronym but CAIVRS stood for a different but similar name at one time before HUD changed it and they never changed the acronym). Lenders must look up all borrowers to determine that they are not disallowed an FHA loan before they can proceed and if it has not been 3 years or more since the date HUD finalized the claim on your home, you would not yet be eligible. When you are ready to get serious about looking for a home, check with us or any FHA lender and we can check the status to see if you are cleared to purchase and if not, we can request the timeframe as to when you will be.
No you will not be forced to move. If you have a line of credit with funds available, that line will be frozen until the servicer receives notification that it is OK to again advance funds from the court but even then, you will still be able to stay in your home.
That's a really tough question to answer blind. Borrowers in the midst of a lawsuit or with a judgement entered against them are all looked at on a case-by-case basis. For example, if it was a case of a simple judgement resulting from the fact that you bought a product that you feel was misrepresented, etc., went to court and they prevailed, it would not prevent you from getting the loan but the judgement would have to be paid off as there can be no prior liens on title. If the ultimate liability of the lawsuit and judgement were unknown, it might delay your ability to close a loan until you could determine what your circumstances would be as could be the case with a personal injury case in which the insurance may or may not pay the claim but then may or may not cancel their insurance as a result (i.e. with a dog bite).
If the circumstances revolved around your willingness or ability to pay obligations as might be the case if the lawsuit was the result of non-payment of debts, that would have to be completely explained and evaluated. But unfortunately, I can't give you a one-size fits all answer for this question. The civil suit might not have any effect at all other than to make sure that the lien was paid if you owed one or it could delay the loan or even stop it if the liability amount on the judgement was higher than the borrower's ability to repay since there can be no prior liens with a reverse mortgage. If you have specifics for your case, I would invite you to contact us and let us review your circumstances to see what can be done.
We really have no concern into what type of mortgage we are paying off as long as you have made on-time payments in the last 24 months. Also note that any refinance you take where you receive more than $500 in cash from the program you must wait 12 months prior to applying for a new reverse mortgage.
Hello Mr. Womack,
Yes we can still help you. Any time you have had tax or mortgage late payments in the last 24 months FHA will still allow us to complete your reverse mortgage as long as you agree to us maintaining your property taxes and homeowners insurance through what is called a reverse mortgage LESA, tax and insurance set aside.
Current guidelines require that you have a payment arrangement on any delinquent federal debt. Once you have made a payment arrangement and can demonstrate three months on time payments we can then complete your reverse mortgage request.
As long as the loan which you took that resulted in default was not an FHA mortgage and your past 24 month credit history has been clean including any mortgages, credit cards, automobile loans, taxes and insurance, you will qualify now.
When applying for a reverse mortgage loan we must look at your last 24 month credit history. If you have had any serious late payments such as mortgage or tax insurance etc. we can still approve your loan but only with what is called a LESA. This is a special tax and insurance set aside which would allow for us to make sure that your property taxes and homeowners insurance are kept current for your expected lifetime.
The set aside gets in the way of the amount of money available to you from the reverse mortgage loan so you must have enough equity in your property for us to account for this amount. We have put a couple examples together on our blog post titled Reverse Mortgage Set-Aside (LESA) Offers Peace of Mind. Feel free to request a quote and we will return your analysis with the required set-aside information.
All Chapter 7 Bankruptcies would have to be completely discharged prior to the reverse mortgage, you would not be able to use the reverse mortgage proceeds to complete the Bankruptcy. In addition, unless there are some verifiable extenuating circumstances for the Bankruptcy that would prove that it was centralized around one specific time period and due to something out of your control (i.e. a death in the immediate family, extreme illness, loss of job, etc), you would be required to take the Life Expectancy Set Aside (LESA) under the HUD Financial Assessment Guidelines. A LESA puts money aside from your reverse mortgage to pay for your taxes and insurance while you live in the home. There is no 2 year period that you would have to wait for a refinance of a home that you already own, that restriction is when you are looking to buy a new home with a reverse mortgage.
HUD will allow borrowers to refinance out of a Chapter 13 Bankruptcy but only if they have made at least 12 months of timely payments on the bankruptcy plan/agreement and then also obtain Court Approval. That is the Court Approval that you read about but that is not the same situation as the Chapter 7 Bankruptcy that must be fully discharged prior to the loan being completed.
You may only enter into a reverse mortgage while in bankruptcy if you have approval from the courts. Having said that there are also credit requirements to be approved for a reverse mortgage and you will need to discuss your eligibility with one of our licensed loan officers.
HUD treats a deed in lieu of foreclose the same way they do as actual foreclosure. Borrowers who have a good, verifiable explanation for the circumstances that occurred, have had 24 months pass without other credit issues and otherwise qualify for the loan are eligible for a reverse mortgage.
The fact that you have a tax lien does not eliminate your eligibility but you cannot get the reverse mortgage while the tax lien is still in effect. In other words, you must satisfy the liens first and then you are able to obtain the reverse mortgage. The fact that you have the lien does not automatically disqualify you from the loan but you have to satisfy the lien before the loan can be closed so it may become a "catch 22" if you need the funds from the reverse mortgage to pay the liens because that is not allowed.
Credit card zero balances have no effect on your reverse mortgage qualification. Lenders do not have to add any kind of a payment amount on accounts where you don't owe any money. Therefore, the $700 per month that you owe on the credit card debt that you have will be taken into consideration for qualification purposes, but any credit cards with zero balances will have no impact whatsoever.
All of the conditions of the loan responsibilities of the borrower or the "rules" that the borrower has to follow as well as the reasons for acceleration of the loan are contained within the Note, the Deed of Trust or Mortgage, and the Security Agreement. If somebody were to obtain a lien against you and file it against your property, that would not normally cause the lender to initiate foreclosure of your home nor would the reverse mortgage prevent any legal avenues that the lienholder had based on state and local laws. Assuming that lien wasn't for taxes or a mechanics lien or some other lien that took precedence or priority position over the mortgage of record, it would not affect your reverse mortgage. If it was for something like property taxes, then there are methods written into the documents to remedy this situation and yes, foreclosure is one of them.
If you are referring to some other type of lien and you are concerned about whether or not that lien has the ability to force a sale of the property, I'm sorry I cannot help you with that information. You really should seek legal advice on that type of a subject.
With late taxes and no insurance, you can still get a reverse mortgage but you would have to get insurance and the lender would require a Life Expectancy Set Aside (LESA) for payment of the taxes and insurance in the future. It will mean less money available to you in the loan, but it will also mean that your taxes and insurance will always be paid on time in the future as the lender uses this money to make those payments.
The funds are only considered "borrowed" when the lender actually uses them to make payment so you don't accrue any interest on the funds in the LESA until they are used to pay for your expenses. Many borrowers actually like the arrangement as they no longer have to worry about the payment of their taxes or insurance either and so their only home expenses are for utilities and maintenance.
If the Florida home goes into foreclosure after the North Carolina property has already been in a reverse mortgage there would be no effect on the North Carolina home. The loan on the NC property is already closed and the one property is not tied to the other in any way.
A Bankruptcy on the other hand could affect your reverse mortgage on your NC home. Section 4.4 of the Security Agreement of your reverse mortgage states: "Bankruptcy. Lender shall have no obligation to make further Loan Advances on or following the date that a petition for bankruptcy of Borrower is filed." This gives the lender an opportunity to determine if the bankruptcy will endanger their security position and they may or may not make any further advances to you at that time. They could again begin making payments to you once they have determined that they are not affected by the terms of the BK, or if the full proceeds have already been withdrawn, it would not affect the loan.
This is not a yes or no answer so forgive me if this is a bit longer answer than you wanted. Most collections do not have to be paid off to get a reverse mortgage. Now having said that, if the collection is for a federally insured debt (such as federally-insured student loan), then it would have to be paid to close the loan. Also, if the debt can become one that affects the title to the property, the lender could require the payoff of the loan.
Judgments on the other hand, usually do have to be paid in full as they are a recorded liability against a borrower that can affect the property. Just as before though, you also have some exceptions here. Some judgments are expressly prohibited by law from having an effect on real property. For example, Texas has very strong property rights and will not allow some judgments to affect a borrower's home. Here again, you have to be careful because we recently had a home on which a judgment did affect a borrower's home in Texas for taxes on a rental property that he owned. Whereas the state would not allow other creditors to lien his home, the state was allowed to do so for taxes on the other property.
If you have questions about your individual circumstances, you can always have your lender order the credit report and title policy first and not order the appraisal until after those items are in and you know exactly what will be required of you. It might stretch out the processing time of your loan, but this way if it turns out the judgments and collection accounts are too numerous to continue, you did not have to pay for an appraisal to make this determination.
You cannot be delinquent on any government obligations and still be eligible for a reverse mortgage. Some student loans are government-insured student loans while other loans are private loans. If your loan is one of the government-insured loans, you would not be eligible for the reverse mortgage program if there was still a loss outstanding on another government-insured loan program.
On another note though, HUD is about to implement financial assessment guidelines on the reverse mortgage program. In other words, borrowers will have to be able to demonstrate the ability to pay things like taxes, insurance and still be able to live comfortably on their income. Without knowing what income would be added by your receipt of the reverse mortgage proceeds, you may wish to consider consulting a financial or reverse mortgage counselor to determine if the mortgage is the right decision for you.
With monthly income of just $732 and with property taxes and insurance in Florida being a bit on the high side, you may be using all your equity far too fast just to stay in the home. There are times when other alternatives may be less expensive and more appropriate, especially if your income, assets and reverse mortgage proceeds will not allow you to still live comfortably in the home without quickly stripping your equity.
I honestly could not answer this for all borrowers. I have only run a credit report on one borrower who took a full draw and she paid off other revolving debt and her scores went up considerably. Since there are no payments to report, the last time I checked, reverse mortgages were not reporting to the repositories. And while the big three credit agencies will not divulge exactly what goes into their credit score formulas, most experts will tell you that the availability of revolving credit to the amount used is what they weight most heavily after current credit patterns. Most borrowers' credit scores are not affected by their mortgages...only if they do not pay them on time.
I guess the only way to know this for sure would be to contact several individuals who have full draw reverse mortgages to see if their scores changed from the time before and after they obtained their reverse mortgage.
HUD currently has no minimum time requirement for a borrower after a short sale before they are eligible for a reverse mortgage. Tw things you need to keep in mind though: 1) Lenders can impose more strict guidelines; and 2) HUD does have restrictions on borrowers if the property on which they had the short sale was an FHA-insured loan and HUD suffered a loss as a result.
HUD is in the process of reviewing financial assessment guidelines and therefore they may have tighter restrictions on past credit issues as soon as they announce their new guidelines. If you speak with a lender in the meantime that is imposing stricter guidelines than HUD, then you certainly can call around and talk to other lenders. If the short sale you had was a government-insured loan, you may not be eligible for another government insured loan until all losses have been reimbursed to HUD. If the loan on which you had the short sale was not government-insured, you would not have to worry about this issue.
The answer to all of this is yes...but there are guidelines that HUD requires lenders to follow. The Short Sale, as with Foreclosure will not preclude you from getting a reverse mortgage, but I would have to ask if the Short Sale caused a loss on government-insured or guaranteed loan. You would not be eligible for another government loan until all losses were paid in full.
With regard to your assets. The insurance must have had a cash value available for which you are taking your funds and the lender would require previous statements verifying that the money was available and then a copy of the check and statement from when you cashed in the policy to verify that it was not a loan against the policy. You can get a gift from a family member. The family member will have to supply 3 months' bank statements to verify that they had the funds to give, a copy of the transfer of the funds and they will need to give you a gift letter that the funds are a gift, not a loan which must be repaid.
The prior foreclosure will not prevent you from getting the reverse mortgage if it was not a government insured loan. HUD will not insure additional loans for borrowers if there are still outstanding claims from prior loans but if the loan that you had was not a government loan and therefore not government insured or guaranteed, you would not be ineligible due to the prior foreclosure.
The answer to your question is... that depends! FHA has a program available for non-occupant co-signers as well as occupying co-borrowers. If you did the loan is a co-signer and did not state that you were going to live in the property as your primary residence, then FHA guidelines will allow you to get a reverse mortgage now. You would have to get a copy of the Note and Deed from the first transaction with your kids to verify the nature of that transaction as well as 12 months cancelled checks from the children to verify that they have been making the payments on the other loan.
If however you were listed as a co-borrower on your kids transaction and you stated that you were going to occupy that property, then you would not be eligible for an FHA-insured reverse mortgage on another property now. Your kids would have to sell or refinance that loan thereby removing you from the liability for you to become eligible for another owner-occupied FHA loan. Unfortunately we see a lot of instances where borrowers are coached into signing as occupying co-borrowers for ease of qualification on other family members' purchases, never knowing what it might do to their own chances of getting an FHA-insured loan later. It does not even seem to occur to those not involved in reverse mortgages that it may adversely affect borrowers seeking this type of financing later and I sincerely hope that this is not the case for you.
In the past, HUD and lenders had almost no credit qualifications for a reverse mortgage. As long as the bankruptcy was completed and there was a good explanation for the foreclosure, the loan could still be done without too much problem if all other factors were as required by the program. However, HUD is going to announce new financial and credit assessment guidelines that will require borrowers to "qualify" to some extent for the reverse mortgage very soon. HUD has not announced their new requirements yet, but the National Reverse Mortgage Lenders Association (NRMLA) and at least one major lender have announced their recommendations or guidelines (in the case of NRMLA recommendations, in the case of the lender, they are their new lending guidelines). Other lenders have chosen to wait for HUD's announcement presumably so that they can issue guidelines one time - knowing that they will cover all requirements and not be too restrictive at the same time. Read more about credit qualifications here...
A number of factors go into the amount you receive on a reverse mortgage loan. The short answer though is that if you are not within 180 days of your next birthday, with today's rates and assuming your value is not greater than the current limit of $625,500 (which is currently set to go down to $417,000 on January 1, 2012 if Congress does not act to extend the current temporary increased limit), then you could expect to be eligible for a gross benefit of approximately 68% of the value of your home on the standard programs from which any liens and the reverse mortgage fees would be deducted. Some closing fees vary by area and so the only way to really know what you would be eligible for would be to have a proposal prepared with all your specific information.