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 requirements” vary with each scenario. For example, HUD does not require homes to even have central heat, just an acceptable permanent heat source that is 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 even 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 Manual 

If you would like to read and check the items that you feel would and would not pertain to your circumstances, you can go to the HUD website at https://portal.hud.gov/hudportal/HUD to review their various manuals. The only problem as you alluded to above, is that HUD has several sources that all deal with property requirements.

With regard to 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 have to 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.

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

FHA’s 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 on the appraisal report the name of the community system(s). The lender is responsible to ensure the community system(s) are licensed and adequate to service the property.

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

This includes numerous types of 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 and means that not all your answers are coming in a single written response, but 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.

Property 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 does in accordance with 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 nearby 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 that will affect the home’s livability.  Some repairs may be completed after the loan closes with funds set aside for repair completion.

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