What do I do if I don’t qualify for an FHA reverse mortgage?!!!!

What do I do if I don’t qualify for an FHA reverse mortgage?!!!!


The overwhelming majority of reverse mortgages are FHA HECMs (home equity conversion mortgages). Even if a homeowner qualifies for other reverse mortgage offerings they usually get the FHA product for several reasons:
- Flexibility to obtain funds in a variety of ways (lump sum, monthly cash flow, line of credit)
- The non-cancellable line of credit (unlike traditional equity lines)
- Government guarantee that future benefits will be paid
- Alternative loan products are usually designed for high-value properties
Because the FHA lending limit is $679,650 nationwide, and the amount actually available to the homeowner less than that, depending on the age of the homeowner, most homeowners aren’t going to be able to get more than about $340,000. In this case, there are usually three possible options:
- Pay down the mortgage balance to the level that will qualify for the FHA HECM. Most homeowners do not have the resources to do this or they wouldn’t be asking about a reverse mortgage!
- Use a non-FHA reverse mortgage. More on this option below.
- Use an “equity release” product to obtain cash from equity without making payments on that cash release.
The non-FHA, or “jumbo” reverse mortgage products are designed for higher value properties (typically over $1 million). Unlike FHA HECM reverse mortgages, the benefits come in only one form: cash to homeowner for any eligible amount over the amount the homeowner owes. For example, if a homeowner has a home that is valued at $1.4 million and owes $500,000 he/she would not qualify for a HECM unless a very large check was written to reduce the loan balance. With a jumbo reverse, there would likely be enough loan proceeds to pay off the loan balance, but no additional funds would be available. If the loan balance was, say $375,000, the homeowner would achieve payoff of that loan and would receive a lump sum of approximately $125,000.
The current rate for this type of loan is fixed (unlike most HECMs, which typically adjust monthly or annually), currently at 5.99%. That rate sounds high but actually isn’t too bad when one considers the following:
- No upfront mortgage insurance is required, unlike FHA loans. This cost can be as high as $12,000
- No ongoing mortgage insurance is required, unlike FHA loans. This cost is 50 BPS.
- The rate is fixed
Apart from the loan amount issue, is there ever another reason why someone would get a non-FHA reverse mortgage?
Yes, in some other cases the non-FHA reverse may be the better option:
1. Homeowner does not expect to own their home for more than 1-3 years: While the upfront costs of an FHA reverse are high, these costs may be worth it for homeowners who expect to be in their homes indefinitely (i.e. at least five years) because of the flexibility in how benefits can be used and the government guarantee. Many homeowners need immediate financial relief but do not expect to own their homes for more than 1-3 years because of health issues or other factors. In these cases, the lower upfront costs of non-FHA reverse mortgages may make this option more cost-effective.                                        
The homeowner lives in a condo that is not FHA-approved: To get a HECM on a condo, the condo project must have been approved by the FHA. Securing condo project approval can be done, but the process can be expensive and time-consuming. Non-FHA reverse mortgage products require a project review to make sure the association is financially stable, etc., but this review is done by the loan underwriter, not the FHA, so it is much easier

Advance planning enables jumbo VA home purchase

Property type: Single-family home in Dublin. Price: $1.052 million. Loan amount: $824,087. Loan terms: 30-year fixed at 4.00 percent. Background: Rick Weber’s clients wanted to purchase a new home in Dublin and take advantage of all the benefits of the Veterans Administration loan program. With limited resources available to the borrowers for a down payment, the low down payment/no mortgage insurance aspects of the VA product were the perfect solution to making a serious bid in a competitive market. A complicating factor in the financing was that o...

March 8th, 2018 Advance planning enables jumbo VA home purchase

Higher FHA loan limits and reverse mortgages!

  The Federal Housing Administration (FHA) increased lending limits effective January 1, 2018. As a result, the nationwide lending limit for reverse mortgages increased to $679,650, up from $636,150, an increase of about 7%. While certainly a welcome development, this increase only partially offsets the approximately 15% reduction in benefits that accompanied the new fee structure implemented October 2, 2017. There is a lot of confusion out there about FHA loan limits as they relate to reverse mortgages. Here are some common questions: Question 1: Don’t FHA lending limits vary...

February 20th, 2018 | , What the HECM, Reverse Mortgage, Higher FHA loan limits and reverse mortgages!

Buying in the Bay Area | Home Buyer Class

Event DescriptionIs this your first time buying a home?  You are the type of person that wants to do it right?  It’s not easy to purchase a home in a hot market, but that doesn’t mean it’s impossible, especially when you begin the process well informed. To help you get a leg up in this competitive market, and get your finances in order, we’re bringing our monthly crash course on the basics of buying a home to Impact Hub.You’ll get solid advice from a team of pros in a setting that is far more relaxed than your last crowded open house.Here’s what yo...

January 14th, 2016 | Bay Area, events, first time home buyers, home buying, Millenials, purchase, Brenda Wyatt, home prices, Buying in the Bay Area | Home Buyer Class

Marketwatch for November 25, 2015

John Holmgren's weekly "Marketwatch" with useful insights as to recent developments in the financial and mortgage markets. November 25, 2015: Rates stable as markets await Fed move; Home prices continue to rise nationwide. Read it here.

November 25th, 2015 Marketwatch for November 25, 2015

5 Star Review for Jim Valler!

Jim Valler helped us get our first home! He took care and attention to detail throughout the whole process. I highly recommend Jim Valler to fulfill your mortgage needs in an efficient and timely manner- we closed escrow on the projected date!   Read more here.

November 23rd, 2015 5 Star Review for Jim Valler!

Just Approved in SF Gate for Brenda Wyatt!

Just Approved: Two ‘piggyback’ loans required for home sale Unable to qualify for a jumbo loan, the client was referred to Brenda Wyatt by Julia Temple at Red Oak Realty, who was familiar with Wyatt’s expertise in navigating complex financing situations. While the client had plenty of qualifying income, 20 percent down and great credit scores, she was not a big user of credit. Wyatt explained that this was the reason she had not qualified and suggested using a “piggyback” loan. A piggyback loan describes two loans that are opened simultaneo...

November 23rd, 2015 Just Approved in SF Gate for Brenda Wyatt!

Pages: 1 2 3 4 5 6 7 8 Next >

Holmgren and Associates

DBA of Finance of America
1900 Mountain Boulevard
Oakland, California 94611
Phone: 510-339-2121
NMLS 0910184/1071

Holmgren & Associates is a branch of Finance of America. We are a full service mortgage banker with an experienced staff offering expertise in residential mortgage lending, with primary focus on loans for home purchase, refinance, and reverse mortgages.

Find Us On: