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

When applying for a reverse mortgage, your home must meet specific property standards set by HUD.  These requirements ensure the property is safe, sound, and secure—but they can vary depending on your specific situation.

For instance, a home does not need central heating, but it must have a permanent, working heat source that HUD considers acceptable.  The same applies to water and waste systems: requirements differ depending on whether you use a private or community well, or if your home relies on a septic system versus city services.

Because the rules can be detailed and sometimes confusing, it’s not practical to list every possibility here.  Fortunately, HUD makes its complete manuals available to the public, allowing homeowners to review the official guidelines as needed.

HUD Property Requirement Manual

If you want to review the official guidelines, HUD makes its manuals available to the public on its website.  The challenge is that the information is spread across several sources, and it can feel overwhelming if you don’t know where to look.

For reverse mortgages, it’s important to review both the general HUD property requirements and the sections specific to the HECM program.  In addition to the handbook, HUD issues Mortgagee Letters, which sometimes add or update property requirements.

Keep in mind, these are HUD’s minimum standards. Individual lenders may apply additional rules, known as overlays, that exceed HUD’s requirements. In other words, meeting HUD’s standards does not always guarantee that every lender will approve your property.

If you’re researching a specific issue, such as septic or sewer system guidelines, you can use the search box on HUD’s main website to find detailed answers.

Pro Tip – Always ask your lender if they have overlays beyond HUD’s requirements. While HUD sets the baseline standards, lenders often add their own rules, which can impact whether your property qualifies.

FHA’s Property Requirements for Septic and Sewer Systems

FHA requires that homes be connected to a public sewer system whenever feasible. If that’s not possible, the property may instead rely on an individual septic system or a community sewage system, provided they meet HUD/FHA standards.

Community Sewer Systems

HUD no longer maintains a list of approved systems. Instead:

  • The appraiser must record the name of the community system on the appraisal report.

  • The lender is responsible for confirming that the system is properly licensed and capable of servicing the property.

Individual Sewage Systems

If a property cannot connect to public sewer and instead uses an individual system that is acceptable to the local health authority, HUD/FHA will accept it.

  • This may include septic tanks, cesspools, pit privies, and mound systems.

  • Inspections are only required if there is evidence of failure, a state or local requirement, local custom, or at the lender’s discretion.

When inspections are required, they must be completed by:

  • The local health authority,

  • A licensed sanitation professional, or

  • Another qualified party, as determined by the Direct Endorsement (DE) Underwriter.

If the home has been vacant for more than 30 days, the underwriter must determine if an inspection is necessary, even if there are no signs of failure.

Key Takeaway – FHA allows septic and community systems when public sewer isn’t available—but lenders and appraisers have the final say on inspections and approvals. Always confirm with your lender if additional requirements (overlays) apply to your property.

Property Types That Work for Reverse Mortgages

Loan TypeEligible HomesKey Things to Know
HECM (FHA-Insured)Single-family homes; FHA-approved condos; Manufactured homes (built after June 15, 1976); 1–4 unit properties (borrower must live in one unit)Must meet FHA property standards; Home must be your primary residence (not a vacation home or rental)
Proprietary (Jumbo)Single-family homes; Some condos (even if not FHA-approved); Certain multi-family propertiesNot government-insured; More flexible than FHA rules; Designed for higher-value homes

Curious If Your Property Qualifies? Find out with a custom reverse mortgage quote from All Reverse Mortgage—America’s #1 with a 4.99/5-star rating! Call (800) 565-1722 or click here for your free quote —simple, trusted, 100% secure!

Property FAQs

Q.

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.
Q.

Can a reverse mortgage be done on an investment property?

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

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.
Q.

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 close to your property as possible that are 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.

Q.

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

You can obtain a reverse mortgage if the repairs are not considered to be health and safety concerns, functional inadequacies, or those 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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