Understanding Reverse Mortgage Qualifications

In this video, we break down the basic qualifications for a reverse mortgage, helping you understand what lenders look for and what you need to be eligible.

1. Income and Credit Requirements

To qualify for a reverse mortgage, borrowers must pass income and credit checks. However, these requirements differ from traditional mortgages:

• Income is assessed based on residual income—what’s left after all monthly obligations are deducted.
• Think of it like VA loan financing; it’s not based solely on gross monthly income.
• Expenses deducted include:
  • Property taxes
  • Homeowners insurance
  • HOA dues (if any)
  • Minimum monthly debt payments

For qualification:

• A single borrower must have at least $589 in monthly residual income.
• For two borrowers, the threshold is around $1,000.

2. Credit Requirements: Not FICO-Based

Unlike conventional mortgages, traditional FHA HECM (Home Equity Conversion Mortgage) reverse mortgages are not FICO-driven.

Instead:

• Lenders review the last 24 months of the borrower’s payment history.
• They check for on-time payments on:
  • Credit accounts
  • Property taxes
  • Homeowners insurance

If you’ve been consistent in payments, you’ll likely qualify.

3. What About Existing Mortgage Payments?

A major benefit of a reverse mortgage is that it eliminates monthly mortgage payments. But that’s not all.

4. Can You Get Cash Out from a Reverse Mortgage?

Yes, absolutely. Borrowers may also access equity in their home as cash out, which can be used for:

• Covering medical expenses
• Supplementing retirement income
• Home renovations
• Or any other personal needs

This provides both financial relief and flexibility.

Final Thoughts

Reverse mortgages are not one-size-fits-all, but for many seniors, they offer a unique path to financial freedom—without the burden of monthly payments. If you’re curious whether you qualify, consider consulting with a certified reverse mortgage advisor.