You may be interested in applying for a reverse mortgage, but like any loan, there are specific qualifications you must meet.  And because the Federal Housing Administration insures most reverse mortgages, many aspects of your finances and home condition need to meet government standards for this to happen.

Some more apparent reasons someone may not qualify for a reverse mortgage are not meeting the minimum age requirement of 62 or simply not having enough home equity.  But some other reasons might not be as obvious and that you might not even consider.

Here are the 3 qualifications for a reverse mortgage loan:

ARLO teaching reverse mortgage eligibility & qualifications

Understanding the Role of Credit in Reverse Mortgage Eligibility

A misconception is that a reverse mortgage only looks at the equity you have in your home.  Your equity will be considered along with the amount of debt you have in other areas.  Your credit history can also have a significant impact on your eligibility.

A history of late or outstanding payments on credit cards, mortgages, or other loan accounts can affect reverse mortgage eligibility.  In some cases, the reverse mortgage lender may suggest waiting for some time so that the borrower can repair their credit and then re-apply for the loan.

The amount that you owe on your current mortgage also plays a role in your eligibility.  If you do not own your home outright, you must have a low enough mortgage balance that can be paid off with the proceeds from the reverse mortgage loan.  You must still be able to keep up on taxes, insurance, and other property charges once you have the loan.  The lender will help determine this through a thorough financial assessment of the borrower. 

Meeting Income Requirements for Reverse Mortgage Approval

Many people who apply for reverse mortgages are either nearing retirement or are already in retirement, so they no longer have income from a full-time job.  Social Security income is a consideration for applicants, as are any other forms of income, such as part-time work or rental income.

Whereas forward or traditional loans use ratios to determine eligibility, where they determine a percentage of your income as an acceptable level to be paid toward your mortgage and then a higher level to be paid toward your total debt, reverse mortgages use the residual income method of qualification.

This is your leftover or residual income.  This is where the underwriter will take all your obligations (housing and other debts) and subtract them from your monthly income to determine how much money you have left to live on each month.  HUD has different residual income levels required for different parts of the country depending on living costs and the size of your family.

LESA: A Solution for Income and Credit Challenges in Reverse Mortgages

In some cases, applicants are denied because they don’t have enough monthly income to keep up with the estimated property charges.  However, more borrowers than not are allowed to obtain a reverse mortgage by setting funds aside from their loan to pay for their property charges as they come due.

This relatively new feature for reverse mortgage borrowers that can help some applicants qualify even if they do not meet the credit or income requirements is known as a Life Expectancy Set Aside or “Lee-sah.”

“Set aside” rules allow lenders to set aside funds borrowers must pay for their property charges.  The LESA will help borrowers with some credit issues that may not have been approved on their own but whose credit is not so terrible that it warrants a loan declination no matter what.

HUD wants to make the reverse mortgage program available to all borrowers that the loan would truly help.  Still, if the borrowers’ positions are not better even after the closing of a reverse mortgage, HUD does not want to delay the inevitable loss of the home. 

In other words, if a borrower still cannot afford a home, even with a reverse mortgage, and it is clear that with their income and expenses, they are heading into a situation where they would lose their home, they should face that eventuality.  At the same time, they still have all their equity and take appropriate steps to downsize or do something else that is appropriate.

Set Aside accounts work well for borrowers who may have trouble paying taxes and insurance on the home, as failure to keep these obligations current could result in the loan being called due and payable.  The lender looks at all the costs you could incur over your estimated lifetime and then determines the set-aside amount accordingly. 

The funds are taken directly from the reverse mortgage proceeds and are used to pay for annual taxes and insurance on your home.  Some borrowers will be required to set aside these funds, but it’s an option for any borrower getting a reverse mortgage if they would like to choose this service. 

If you are required to take out a set aside, it is important to understand how much is being taken from your total amount of funds.  Ask your lender upfront how a set aside may impact your proceeds.

Property Standards for Reverse Mortgage Eligibility

Aside from finances, there are also several qualifications regarding the home that all applicants must meet to obtain a reverse mortgage.  Many people may think they are eligible but find out they lack one or more qualifications for their home once they apply.

A significant component of home qualifications is ensuring your home meets the Federal Housing Administration’s (FHA) property requirementsMost of the qualifications revolve around the safety and upkeep of your home.  For example, if you have a faulty roof or problems with accessing the home safely, you could be required to complete home repairs before being approved.

If fire hazards are present, you may also have to fix those.  FHA also has specific requirements for manufactured homes and condominiumsSome condominiums and manufactured homes are HUD-approved, which means they could qualify for a reverse mortgage, but others are not.  Be sure to ask your lender if your property qualifies.

Read more: Reverse Mortgage Property Requirements (Updated 2024)

FAQs: Understanding Eligibility and Requirements


What percentage of equity is required to qualify for a reverse mortgage?

The percentage of equity needed to qualify for a reverse mortgage will depend on the age of the youngest borrower or spouse and the loan’s interest rate when applying.  As of 2024, the best-case loan-to-value for a 62-year-old is 37% (if the expected rate reaches the floor for the calculator), and that loan-to-value will increase slightly for each higher age and caps at 72% loan-to-value for age 92 or older.  If you have a spouse under the age of 62, they would also be covered by the reverse mortgage, but the amounts would be lower based on the age of the eligible spouse.

Who is not eligible for a reverse mortgage?

Several factors determine whether someone would be ineligible for a reverse mortgage loan.  Age, Occupation, credit, and equity are the most common factors.  To get a reverse mortgage, you must meet the minimum age requirement; you must occupy the property as your primary residence; you must have good credit or enough equity to allow for a life expectancy set aside for taxes and insurance if you do not; and you must have enough equity in the property to pay off the existing loan(s) or the financial capacity to pay the difference at time of closing.

Are there income requirements for a reverse mortgage?

There are, in fact, income requirements for a reverse mortgage.  To qualify for a reverse mortgage, you must meet the minimum residual income requirement for the product type you are applying for and how many occupants live in your home.  Residual income is typically an easier income qualification than a traditional loan that goes by a debt ratio requirement.  For example, if your total calculated monthly expenses are $2,000 for a family size of 1, and your income is $3,000, you have a 67% debt ratio, but your residual income is $1,000.  This scenario does not meet standard loan guidelines for a traditional mortgage but would be eligible for a reverse mortgage.

What credit score is needed for a reverse mortgage?

The government-insured reverse mortgage (HECM) has no minimum credit score requirement.  Credit qualifications are based on the overall picture of an applicant’s credit history, with the most emphasis on payment history.

Who determines the guidelines for a reverse mortgage?

For the HECM program, the HUD (Department of Housing and Urban Development) sets the program’s base guidelines, and individual lenders also have their guidelines.  Those guidelines are determined solely by the lenders offering those products.

Does your mortgage have to be paid in full or up to date to qualify for Reverse Mortgage?

Your loan does not have to be paid in full before applying for a reverse mortgage, but it would be paid in full with the loan.  Many borrowers use the reverse mortgage to pay off their existing loans, so they no longer have monthly mortgage payments.  HUD does qualify borrowers with a financial assessment.  If you have been late on mortgage payments or other payments for taxes or insurance on the home at any time in the past 24 months, you would probably be required to have funds set aside to pay your taxes and insurance, or your loan may not be approved.  The Set Aside for taxes and insurance is called a LESA (Life Expectancy Set Aside).  It can be a substantial amount if your taxes and insurance are high. You are in your early 60s, or it can be a smaller amount if the taxes and insurance are low and you are older.  If you know you have late payments for any of these property-related items (and that can also include HOA dues), let your lender know up-front so that they can provide you with an accurate quote of what you might expect from your reverse mortgage so you are not surprised later if a LESA is required and your proceeds are not what you thought they would be.

HUD/FHA Qualification-Resources: