Appraisals for Reverse Mortgages

What is a Reverse Mortgage?

So what is a “reverse mortgage” exactly? Essentially the homeowner can use a reverse mortgage as a way to convert the equity and value of his or her home into cash.

A regular mortgage involves someone making payments to a lender in exchange for a loan to purchase a property. A reverse mortgage – as the name implies – is pretty much the opposite; the lender makes payments to the borrower, in exchange for the lender receiving equity in the home.

What Qualifies Me for a Reverse Mortgage?

There are a few requirements for a reverse mortgage. You must:

• Be 62 years of age of older.
• Own your home outright or have a low enough mortgage balance to be paid off at closing (with the reverse mortgage proceeds).
• Live in the home as your primary residence.
• Receive reverse mortgage counseling from an agency approved by the FHA (Federal Housing Administration).

 Will I Need To Have My Home Appraised?

 Absolutely. In order to receive a reverse mortgage, an appraisal must be performed to determine the value of the home, as the reverse mortgage amount is based on the home’s value. In truth, the appraisal process isn’t much different from a regular mortgage.

Do I Need To Know Anything Special About the Appraisal?

Most reverse mortgages are Federal Housing Administration (FHA)-insured; as a result:

The appraisal must be completed by an FHA-approved appraiser.

Not all appraisers have this qualification. The FHA may have specific requirements for the appraiser, like checking and photographing some things a standard appraisal may not include.

Your home needs to meet FHA guidelines.

Likewise, this can create a bit of an issue for a senior hoping to get a reverse mortgage, as the property must meet FHA-minimum property standards to qualify. Older homes may need repairs to meet these requirements – electrical upgrades, roof repairs, plumbing problems; these fixes may require out-of-pocket costs.

What’s The End Result?

With a reverse mortgage loan in place, the homeowner is still responsible for payment of taxes, insurance, and maintenance. Still, he or she can collect related funds, either in a lump sum, as monthly payments, or as a line of credit.

Once the loan expires, and becomes due and payable, the home is typically sold and the proceeds are used to pay back to loan.