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My home is financed through a USDA loan. Can I get a reverse mortgage?By Virginia F. on 12.29.2023
This is not a question I can answer with a simple yes or no. The answer is a possibility. The USDA program is meant for low-income borrowers on rural properties who may or may not meet HUD’s requirements. The income is easy to check because HUD uses a residual income approach for qualifying, which means we need to determine your income, subtract your debts and property obligations, and if you have enough residual income, you qualify. That part is easy to determine and doesn’t cost any money to check, and it also favors borrowers with limited income (as long as their debts are not high).
The stickier part is the property eligibility. We can sometimes tell by looking at public records and looking at sales in the area if your property will meet HUD’s eligibility criteria, but often, it comes down to the information contained in the appraisal and the appraiser’s comments on some properties. Just because you had a USDA loan (which would need to be paid in full for the reverse mortgage) is not a certain indicator that you would not be eligible for a reverse mortgage. But the fact that those loans typically encumber rural properties does give you a reason to go cautiously before spending a lot of money.
The HUD eligibility requirements call for ample available sales of similar properties that have sold recently, and the rural nature of the USDA loan may indicate that your home may not meet the HUD program criteria. The lender can do some preliminary review of public records, but the only way to know for sure if the records show sales activity would be to get the appraisal from an FHA-approved appraiser (after all other factors are reviewed to be sure you would qualify first).