I would like to know the exact reverse mortgage property requirements, such as central heating, water wells, septic systems, etc.  To hear these reverse mortgages advertised, one might get the impression that getting one is very simple.  However, after some preliminary inquiries, it’s beginning to look like everything else where the government is involved – it can become incredibly complicated.

ARLO teaching reverse mortgage property requirements

Exact property requirements vary with each scenario.  For example, HUD does not require homes to have central heat; it just requires an acceptable permanent heat source in working condition.  There are many acceptable sources and some that are not allowed.

The requirements for water wells vary depending on whether the well is a private well, a community well, etc.  Septic systems have different requirements, including whether or not they are even allowed based on the feasibility of hooking up to city services.

I would not attempt to quote everything that may or may not apply to you or your property in a short blog reply.  However, HUD does make all its manuals available to the public on its website.

HUD Property Requirement Manual

If you want to read and check the items you feel would and would not pertain to your circumstances, you can visit the HUD website at https://portal.hud.gov/hudportal/HUD to review their manuals.  As you alluded to, the only problem is that HUD has several sources dealing with property requirements.

Concerning the reverse mortgage program, you have to be sure that you review the HUD general requirements and anything that may pertain to your property in particular in the HECM handbook (and then, if that isn’t bad enough, they also issue Mortgagee Letters that sometimes deal with property requirements).

Chapter 4 of the HUD Manual 4155.2 (https://portal.hud.gov/hudportal/documents/huddoc?id=41552HSGH.pdf )will give you some information about appraisal and property specifics, but if you need to drill down further, you may need to consult the HUD appraisal manual 4150.2

You must remember that these are HUD’s minimum requirements, and lenders can and often do have “overlays” to HUD guidelines for specific circumstances.  Not all lenders will do everything that HUD states.  HUD’s guidelines are a starting point since they are the absolute minimum that must be met to receive the insurance on the loan.

You can also put specific questions into the search box on the HUD website’s first page, for example, “What are FHA’s requirements for septic and sewer systems?”

FHA’s property requirements for septic and sewer systems

FHA requires that a property be connected to a public sewer system if feasible.  If a connection to a public system is not feasible, the property may be served by an individual sewage (septic) system or a community system.

Community Sewer System: HUD no longer maintains a list of approved systems.  The appraiser must note the name of the community system(s) on the appraisal report.  The lender is responsible for ensuring the community system(s) are licensed and adequately servicing the property.

Individual Sewage Systems: For properties that cannot connect to a public system and are served by an individual sewage system acceptable to the local health authority, the system is then acceptable to HUD/FHA.

This includes numerous sewage systems, including cesspools, individual pit privies, and mound systems.  Individual sewage system inspections are only required if there is evidence of system failure if mandated by state or local jurisdiction if customary to the area, or at the lender’s discretion.

In those instances, the appraiser is to condition for an inspection by the local health authority, a licensed sanitation, or an individual determined to be qualified by the DE Underwriter and a certification that the system is operating satisfactorily.

If the home has been unoccupied for more than 30 days (and does not meet one of the conditions noted above), the lender’s underwriter must decide if an inspection of the system is necessary.

Handbook 4150.2 Section 3-6A.5 and Appendix D-4  Handbook 4905.1


Mortgagee Letters 05-48

I know this is a lot of information to digest, meaning that not all your answers come in a single written response.  Still, as I stated, to begin with, this is an area that HUD has devoted a chapter and an entire manual to and not something I can answer in a brief paragraph or two.

Eligible Property Types for Reverse Mortgages: HECM vs. Proprietary

Type of Reverse MortgageEligible Property TypesKey Notes
HECM Reverse MortgageSingle-family homes, FHA-approved condominiums, eligibility manufactured homes and 1-4 owner occupied unitsProperty must meet FHA standards; borrower must occupy the property as their primary residence.
Proprietary Reverse MortgageSingle-family homes, FNMA warrantable condominiums, multi-family propertiesMore flexibility in property types; not limited to FHA-approved communities.
This table provides a comparison of the types of properties that are eligible for HECM and proprietary reverse mortgages, along with key notes for each.

Top FAQs


What types of properties are eligible for a reverse mortgage?

1-4-unit residential properties that meet HUD requirements are eligible for the reverse mortgage program, including condominiums, townhomes, and eligible manufactured homes.

Can a reverse mortgage be done on an investment property?

A reverse mortgage may not be used on investment properties or second homes.

Does HUD need to approve my home for a reverse mortgage?

HUD does not approve your home.  The lender follows HUD requirements.  HUD does receive and review all appraisals for approval, though.

How does the appraiser value my property?

The appraiser determines the value of your home based on the sales comparison method.  This means the appraiser must first inspect your home, taking note of its size, condition, upgrades, amenities, etc., and then find recent sales as near to your property that is as similar to your home as possible at that time and then make market-based adjustments for the differences between your property and each comparable.


Can you get a reverse mortgage if your home needs repairs?

You can get a reverse mortgage if the repairs are not considered health and safety concerns, functional inadequacies, or ones affecting the home’s livability.  Some repairs may be completed after the loan closes, with funds set aside for repair completion.

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