{"id":4656,"date":"2016-04-28T08:14:30","date_gmt":"2016-04-28T08:14:30","guid":{"rendered":"https:\/\/www.movoto.com\/foundation\/?p=4656"},"modified":"2016-04-28T08:14:30","modified_gmt":"2016-04-28T08:14:30","slug":"hud-approved-condos-can-you-still-qualify-for-a-reverse-mortgage","status":"publish","type":"post","link":"https:\/\/www.movoto.com\/blog\/hud-approved-condos-can-you-still-qualify-for-a-reverse-mortgage\/","title":{"rendered":"HUD Approved Condos: Can You Still Qualify for a Reverse Mortgage?"},"content":{"rendered":"

There are so many things you need to think about when buying a home that it can make your head spin. However, if you’re nearing retirement and thinking about buying a home, that adds a whole new dimension to the home buying process and another whole list of things you need to think about as well. One of the things you can add to your list is buying a home with a reverse mortgage in mind. And if you are considering a condo as your next home, and a reverse mortgage is something you will at some point consider, you will also need to know whether or not your preferred condo is on the list of HUD approved condos<\/a>. Yes, we realize this is probably all a bit confusing that’s why we are going to go over it in quite a bit of detail.<\/p>\n

What Is a Reverse Mortgage?<\/b><\/p>\n

A reverse mortgage is a specific type of home loan that will help homeowners who are 62 or older gain access to the equity in their home to help pay for other things. Reverse mortgages are helpful to seniors who want to remain in their homes versus having to go into a retirement home environment. This type of loan will give an older homeowner the money they need to remain in their home, whereas without this income, they might not be able to. However, the money received from a reverse mortgage can be spent on anything the homeowner wants to spend it on.<\/p>\n

How Does a Reverse Mortgage Work?<\/b><\/p>\n

A reverse mortgage is simply a line of credit, a lump sum or a monthly advance on a home’s equity and in some cases it’s all three. These payments are made by the lender to you rather than the way a traditional loan payment works where you pay the lender. Additionally, these loans only come due when the borrower sell’s the home, if he moves out of that home permanently, defaults on the mortgage by not paying the property taxes\u00a0or not keeping adequate homeowners insurance,\u00a0or if the homeowner passes away.<\/p>\n

Are There Different Types of Reverse Mortgages?<\/b><\/p>\n

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There are three different types of reverse mortgages, a single-purpose reverse mortgage, home equity conversion mortgages (HECM’s), and\u00a0a proprietary reverse mortgage. So let’s take a few minutes to go over each one in a little more detail.<\/p>\n

Single-Purpose Reverse Mortgages.<\/strong> This type of reverse mortgage is offered by some state and local government agencies and non-profits. The single-purpose reverse mortgages are not widely available and therefore only make up a small portion of the reverse mortgage market. Additionally, these types of loans are mostly given to low or moderate income homeowners and are sometimes referred to as property tax deferral programs.<\/p>\n

Home Equity Conversion Mortgages (HECMs).<\/strong> This type of loan is the Federal Housing Administration’s (FHA) version of the reverse mortgage and the U.S. government insures these types of loans through the FHA. The HECMs are the most common of the reverse mortgages and make up about 90 percent of the total reverse mortgage market. For this type of loan, you must be at least 62 years of age and use that home as your primary residence. You must also own the home outright or have a significant amount of equity in your home. Additionally, you will qualify for a HECM if your home is a single family home or a one-to four-unit dwelling with you occupying one of those four units. And your home must be a HUD approved condo.<\/p>\n

Proprietary Reverse Mortgages.<\/strong> This type of reverse mortgage is not insured by the FHA and that’s why they’re called proprietary reverse mortgages. Private lenders and banks are where you will find this type of loan, although they are not very popular in today’s reverse mortgage marketplace. However, those that are in existence are primarily available to people with high-value homes. Additionally, proprietary reverse mortgages are quite often readily available to condo owners. These types of loans are also referred to as jumbo reverse mortgages. Borrowers will qualify for a proprietary reverse mortgage based on their age (starting at 60 years old), the home’s value and current interest rates.<\/p>\n

Can I Apply for a Reverse Mortgage If I Live in a Condo?<\/b><\/p>\n

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You can apply for and get a reverse mortgage<\/a> if you own a condo. However, the rules for getting a reverse mortgage for a condo are much different than those for single family residences, because the entire condo complex must be approved first. If you already live in an FHA approved condo, then you shouldn’t have any problems\u00a0if you qualify. Additionally, if you have a condo but you don’t share any walls with other units, then in your particular situation, your home might be considered a “site condo,” which doesn’t need to be FHA approved. However, there are very few condos that fall into this category.<\/p>\n

What Are HUD\u00a0Approved Condos?<\/b><\/p>\n

If you are thinking about taking out an FHA reverse mortgage and you own a condo, that condo complex must be HUD approved before you can do so. A HUD approved condo requires the whole condo complex be approved by the Department of Housing & Urban Development (HUD) before the reverse mortgage loan will be accepted. And this is because the financial stability of the condo community is based on the entire complex as a whole, which means it needs to be financially stable before HUD will approve it.<\/p>\n

What Are the FHA Condo Guidelines for A Complex Being Approved?<\/b><\/p>\n

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The FHA has a set criteria for any condo complex that wants to become HUD approved. That means they will have to comply and submit all requested information along with their application before they will be considered.<\/p>\n

The FHA is going to ask to see their financial statements, insurance policies, and other information regarding the physical make up of the community. The guidelines for approval include a 95 page approval and processing guide, which is a bit outside the scope of this article to cover everything. However, here are a few of the basic requirements.<\/p>\n