Requirement #1: Age
HECM borrowers generally must be 62 or older. Where there is more than one borrower, age can affect available proceeds; the youngest borrower's age is generally used in the calculation.
Requirement #2: Principal Residence
The home must be the borrower's principal residence.
That means a HECM is not ordinary financing for a vacation home, rental property, Airbnb or second home. The borrower must occupy the property.
Requirement #3: Equity
You need enough equity for the HECM structure to work. If the existing mortgage is too large relative to available HECM proceeds, the homeowner may need additional cash to satisfy it at closing.
Requirement #4: Existing Liens
Existing qualifying liens typically need to be satisfied at closing, usually with HECM proceeds or the borrower's own funds.
Requirement #5: Financial Assessment
The lender considers whether the borrower can continue paying taxes, insurance, property charges and maintenance, and may require funds to be set aside for certain future property charges.
Requirement #6: Federal Debt
Current CFPB guidance notes that borrowers generally cannot be delinquent on federal debt unless it is appropriately resolved under the program.
Requirement #7: Counseling
HUD-approved counseling is required before a HECM can be completed.
Property Eligibility
Eligible HECM properties can include certain single-family homes, 2-4 unit homes with one unit owner-occupied, FHA-approved condos, and certain manufactured homes.
Specific property eligibility must be verified under current FHA rules, and not every property qualifies.
Can Someone With a Mortgage Qualify?
Yes, potentially. The existing mortgage balance may be paid from HECM proceeds at closing, subject to the borrower having enough equity and available proceeds.
A Worked Example
Hypothetical example
Home value
$750,000
Mortgage balance
$125,000
Owner age
70
The lender determines available HECM proceeds. The first $125,000 may be needed to satisfy the existing mortgage. Remaining available proceeds depend on the current HECM calculations, including age, interest rates and principal-limit factors at closing.
Figures are hypothetical for illustration only; they do not predict any actual principal limit or loan amount.
How Lisa Helps
Lisa can help with the property and equity side: establish market value, understand how much equity exists, and coordinate the real estate aspects of a HECM or HECM-for-Purchase transaction. Lisa is a REALTOR®, not a reverse-mortgage lender or financial adviser; a licensed HECM lender determines eligibility, proceeds, required cash investment, interest rate and loan terms, and HUD-approved reverse mortgage counseling is required.
