Home / Ask the Experts / Credit Requirements
reverse mortgage credit requirements questions and answers
Close

Hi, I'm ARLO and I Love Questions!

All Reverse Mortgage's resident expert ARLO loves to answer questions. No question is too big or small for him or any of our other experts to answer, so please ask away! We will respond as soon as possible.
Sending Your Question
* Your privacy is very important to us, we will never sell or give your email address or info to any 3rd party unless you give us express permission to do so.

Reverse Mortgage Credit Requirements

Hi! I'm ARLO™, ask me anything about the current reverse mortgage credit requirements and I'll fetch your answer immedietly!
 

Answered By Our Experts

Question From Rob
6/10/2018
I own my home and owe no money but I have a credit score under 500 can I still get a reverse mortgage?
Expert Answer

Hi Rob,

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. 

Do you have a question? click here for an answer
Question From Tina H.
6/09/2018
My relative needs to move out of her house with a reverse mortgage where she owes more than the house is probably worth. If she walks away is it considered a short sale or foreclosure and does it ruin her credit record? If she tries to sell it with a realtor and gets an offer that doesn't cover the amount due how can she close on the loan?
Expert Answer

Hi Tina,

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.

Do you have a question? click here for an answer
Question From Nancy
6/07/2018
Does the amount I owe and credit cards have anything to do with my qualifications? I have great credit.
Expert Answer

Hi Nancy,

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. 

Do you have a question? click here for an answer
Question From Debbi C.
6/01/2018
Hello. I am 64 this year and my husband is 62 in july I spoke with a loan person about a reverse mortgage but they tell me because my husband has a late payment on a credit card we cant qualify, I bought this home without him on the loan itself but he is on title. a few months ago he decided to move to another state and live with some kids from a previous marriage, can I qualify on my own now without him or his credit?
Expert Answer

Hi Debbie,

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.

Do you have a question? click here for an answer
Question From Leslie D.
5/31/2018
If my home is owner financed can i still get a reverse mortgage at age 62?
Expert Answer

Hi Leslie,

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.

Do you have a question? click here for an answer
Question From Earl
5/16/2018
Why do you need credit report?
Expert Answer

Hello Earl,

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.

Do you have a question? click here for an answer
Question From Tracy
5/09/2018
Can a mortgage company evict me from my house if they paid liens?
Expert Answer

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.

Do you have a question? click here for an answer
Question From Bill
4/29/2018
If you have a judgement against you and you own a home purchased with reversed mortgage can a creditor touch it?
Expert Answer

Hi Bill,

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.

Do you have a question? click here for an answer
Question From Carolee J.
4/25/2018
Got behind on Mortgage payments in 2017 and early 2018 due to Medical bills and not being able to work regular hours for a while. My lending institution had us apply for a loan modification and strung us on for months. We were finally turned down. We made up all the payments and had the loan fully reinstated without borrowing any money. We have only a 3 month track record of on time payments since that time. Will we be considered for a reverse mortgage?
Expert Answer

Hi Carolee,

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.

Do you have a question? click here for an answer
Question From Rose
4/18/2018
If I was turned down for an HECM due to past late payments on my mortgage and I had documentation reasons that wasn't accepted by that lender... would your company turn me down for the same reasons since you are FHA approved? I have plenty of equity in my home and need a little help to keep my home and get balanced?
Expert Answer

Hi Rose,

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.

Do you have a question? click here for an answer
Question From Susan J.
2/07/2018
If we are behind making payments on our credit cards can we still get a reverse mortgage?
Expert Answer

Hi Susan,

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. 

Do you have a question? click here for an answer
Question From Alan
1/26/2018
Does a discharged student loan due to disability limit ability to get reverse mortgage?
Expert Answer

Hello Alan,

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).  

Do you have a question? click here for an answer
Question From Yvonne W.
1/03/2018
If one lender says I do not qualify for a reverse mortgage, should I check with another lender?
Expert Answer

Hi Yvonne,

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.

Do you have a question? click here for an answer
Question From Marla M.
11/06/2017
We have a child support judgement that we have been paying monthly in Texas for 2 years with a large balance still owing. We have great credit and our income supports the payments. Is that going to keep us from getting a reverse mortgage. The house is our homestead.
Expert Answer

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.  

Do you have a question? click here for an answer
Question From Darlene D.
8/14/2017
My husband has always paid all of the bills: insurance, etc. Is me, as his wife's credit score important when qualifying for a reverse mortgage?
Expert Answer

Hi Darlene,

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.

Do you have a question? click here for an answer
Question From Chris
6/23/2017
If I'm 80 years old and own a home but son is co owner by survivorship and has a home equity line of credit in his name and defaulted loan and now I'm about to lose house, can I qualify for a reverse mortgage without his authorization since he is co owner? The house is paid off except for sons home equity line of credit.
Expert Answer

Hi Chris,

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.

Do you have a question? click here for an answer
Question From Carolyn O.
5/02/2017
I was trying to get a RM from a broker friend of mine. my credit is not good and I had a Bk in 2014 due to foreclosure proceedings while trying to get a loan modification. However, since October of 2015 I have never missed a mtg Pymt nor have I ever been late. I was told today that due to credit I would have to pay 19 years of impounds. Does this sound right to you?
Expert Answer

Hi Carolyn,

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. 

Do you have a question? click here for an answer
Question From Darrell
4/14/2017
I had a foreclosure and Chap 7 bankruptcy in 2010. Would I be able to receive a reverse mortgage now?
Expert Answer

Hi Darrell,

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.

Do you have a question? click here for an answer
Question From John G.
4/11/2017
Can I apply for a reverse mortgage if original loan has been modified.
Expert Answer

Hi John,

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.

Do you have a question? click here for an answer
Question From Rick F.
3/30/2017
I successfully executed a short sale on two investment properties back in 2014. The first short sale closed 10/31/2014 and the second short sale closed on 12/9/2014. Both loans were originally with Countrywide/Bank of America but were sold off to Nationstar and Select Portfolio Servicing (SPS) at a later date when we stopped making payments. We are now retired and live in a house where we would like to take out a reverse mortgage line of credit so we can do some upgrades to our front yard. Must I wait 3 years from the latest date listed above (i.e., 12/9/2014) before I can apply for a reverse mortgage line of credit with you or is there some lenders who will accept only two years from the latest payment on the short sale property? Thank you, I look forward to your response. Rick
Expert Answer

Hi Rick,

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.

Do you have a question? click here for an answer
Question From Kay
3/20/2017
If a home is in forclosure can a reverse mortgage help and how much would it cost the home owner. The woman is in her 70s
Expert Answer

Hi Kay,

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.

Do you have a question? click here for an answer
Question From Bonnie
1/25/2017
Hello, my previous home was sold and closed in July 2014 with a short sale resulting in a $42,000 loss for the lender/FHA. Would I be eligible to do a reverse mortgage on my current home next year in 2018?Thank you.
Expert Answer

Hi Bonnie,

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.

Do you have a question? click here for an answer
Question From Kelly U.
11/21/2016
My home is in a reversal mortgage status and I am filing for Chapter 7 bankruptcy. Will I be forced to move from my home?
Expert Answer

Hi Kelly,

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.

Do you have a question? click here for an answer
Question From Judy
11/21/2016
I have someone threatening me with a civil lawsuit. If they get a judgement would that interfere with being accepted for a reverse mortgage?
Expert Answer

Hi Judy,

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.

Do you have a question? click here for an answer
Question From Marlene
9/28/2016
Can I apply for a HARP loan, then a Reverse Mortgage?
Expert Answer

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. 

Do you have a question? click here for an answer
Question From Womack
8/30/2016
Can you get a reverse mortgage if you are 2 months behind in your house payments and have fair credit? I have been very sick and that's how I got behind on bills and we only live on social security.
Expert Answer

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.

 
Do you have a question? click here for an answer
Question From Dennis H.
8/27/2016
Can we still get a reverse mortgage if we owe Federal Income Tax?
Expert Answer

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. 

new financial assessment federal tax requirements

Do you have a question? click here for an answer
Question From Ken
8/24/2016
I had a residential care home I closed after business down turn in 2012. Property foreclosed in 2013. Kept my property current as well as other credit. How long do I need to wait to apply for reverse mortgage?
Expert Answer

Hello Ken,

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. 

Do you have a question? click here for an answer
Question From C. Metzger
8/22/2016
Are you able to get a reverse mortgage if you have a low credit score and your mortgage company is showing 24 months of late payments? Our mortgage has been paid by KYHC for almost 2 years, but since there was a back owed amount the current mortgage company is showing late every month still. Our credit is now in the mid 500 range & we are trying to save our home.
Expert Answer

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. 

Do you have a question? click here for an answer
Question From Barbara R.
8/17/2016
I have approval from the court to seek any means to get them their last Approximate 20K on a chapter 7 bankruptcy. As I have 36K too much equity in my home for a full discharge without payment. My local credit union said I would not be able to apply for a reverse mortgage until 2 years have passed. I am read that I can file during the bankruptcy with approval from the court. If that is true, what must I do to apply? I don't want to have to sell the home my deceased husband purchase for me prior to his death, the one I planned to live in for another 20 years or so (I'm 64.5). Thank you.
Expert Answer

Hi Barbara,

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.

Do you have a question? click here for an answer
Question From Alberta
8/13/2016
If I am in bankruptcy, can I get a reverse mortgage?
Expert Answer

Hello Alberta,

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. 

Do you have a question? click here for an answer
Question From Jeffrey M.
7/09/2016
Can I get a reverse mortgage with a deed of leau on my credit report
Expert Answer

Hi Jeffrey,

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. 

Do you have a question? click here for an answer
Question From Renee C.
5/10/2016
Can a reverse mortgage be had if I have a federal tax lien?
Expert Answer

Hi Renee,

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.

Do you have a question? click here for an answer
Question From Arnold C
4/13/2016
I know credit card debt is figured on the minimum payment on the balances due, but what about credit cards that have 0 balances, but have credit available? I have credit card debt of $70,000 ( payments approx. $700 per month), but have several credit cards with 0 balances that have credit, balance transfers, or cash available. Just want to make sure that the "no balance" credit cards are not figured in to monthly debt?
Expert Answer

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.

Do you have a question? click here for an answer
Question From Wayne C
4/12/2016
If a lien is placed on a reverse mortgage, can the owner lose his home?
Expert Answer

Hi Wayne,

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.

Do you have a question? click here for an answer
Question From Marie C.
3/26/2016
My question is what if you do not have homeowners insurance. My home is paid for. Your taxes are late and you're trying to apply for a reverse mortgage
Expert Answer

Hi Marie,

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.

Do you have a question? click here for an answer
Question From Patty
9/15/2015
We are under chapter 13 bankruptcy would we be able to do a reverse mortgage I am 64 my husband is 78
Do you have a question? click here for an answer
Question From Carol
6/01/2014
We have a rental property in Fl. that is under threat of foreclosure. We also have a reverse mortgage on our residence in N. C. If we declare bankruptcy on the Fl. home will it have any effect on our main residence in N.C.? For that matter, will the Fl. foreclosure affect our N. C. home in any way?
Expert Answer

Hi Carol,

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. 

Do you have a question? click here for an answer
Question From Roland Stoklosa
3/27/2014
I see you require a credit check and fee. Do judgments and/or collections need to be paid in a Reverse Mortgage?
Expert Answer

Hi Roland, 

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.

Do you have a question? click here for an answer
Question From Patricia Adamo
6/05/2013
I am 72 and unable to work regularly due to health issues. I would like to apply for a reverse mortgage, or I may end up going into foreclosure, as my income is now only $732 monthly Social Security. I had a student loan in 1987 which I paid on for years until I became ill, it then went into collection. They added close to $35,000 in FEES. I haven't heard from Student Loans or collections for many years now, but fear they will keep me from getting an FHA backed loan, as I read this on the internet. Is this possible? Florida
Expert Answer

Hi Patricia,

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.  

Do you have a question? click here for an answer
Question From John
2/24/2013
Does taking a reverse mortgage full disbursement have a an adverse effect on credit scores or reports from Experian Transunion or Equifax?
Expert Answer

Hi John,

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.  

Do you have a question? click here for an answer
Question From Terry
10/20/2012
Is it still 2 years after a short sell to do a reverse mortgage.
Expert Answer

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.

Do you have a question? click here for an answer
Question From Bobby
10/10/2012
Can I do a reverse mortgage purchase after having a home disposed of by Short sale by using daughter's help and cashed in insurance policies?
Expert Answer

Hi Bob,

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.

Do you have a question? click here for an answer
Question From Scott
7/30/2012
I've read that to qualify for a reverse mortgage, I must "never have defaulted on government debt." We bought our current residence with cash in September, 2011. In March, 2012, our previous residence was foreclosed after we defaulted on monthly payments. That mortgage was not a "government loan" per se. So... am I able to get a reverse mortgage on the current house?
Expert Answer

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.   

Do you have a question? click here for an answer
Question From Bill
6/21/2012
We cosigned an FHA loan for our son. Does this disqualify us from getting a Reverse Mortgage because of the one FHA loan rule?
Expert Answer

Hi Bill,

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.

Do you have a question? click here for an answer
Question From Jim
11/23/2011
We have always paid our debts on time but our credit card debt became too large, so we filed bankruptcy and had a rental property foreclosed this February. Since bankruptcy we continue to be able to pay our bills on time. No more CCs. I'm age 73. How much equity must one have to qualify for a Reverse Mortgage?
Expert Answer

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.

Do you have a question? click here for an answer
1

Credit Requirement resources from our site:

3rd Party Resources:


Credit Requirements
(35 votes, average: 4.94 out of 5)
How do you rate this article?