If you are like me, you are only familiar with the term “reverse mortgage” because of the commercials on TV. After seeing Alan Thicke talking about the benefits of a reverse mortgage for the hundredth time, I decided to do a little research. I was particularly interested in what a reverse mortgage was, why they were beneficial, and how one would go about getting a reverse mortgage on a manufactured home. Here’s what I learned:
What is a Reverse Mortgage?
A reverse mortgage is a loan available to homeowners, 62 years or older, that allowthem to take the equity in their home and turn it into cash payments.
Reverse mortgages are alsoknown as aHome Equity Conversion Mortgage (HECM).
a financial agreement in which a homeowner relinquishes equity in their home in exchange for regular payments, typically to supplement retirement income…unlike traditional mortgages, which decline as you pay down the loan, reverse mortgages rise over time as interest on the loan accrues..
The loan is not required to be repaid until the home is either sold or vacated. This isvery popular for retirees with limited incomes that need help covering basic living expenses or assistance in paying health care costs.
How are Reverse Mortgages Beneficial? Are they a Scam?
Reverse mortgages are a legitimate product offered by lending institutions. Several rules and regulations must be followed by the bank in a reverse mortgage agreement.
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Are Manufactured Homes Eligible for a Reverse Mortgage?
A manufacturedhomeowner must meet a dizzying list of requirements and inspections to qualify for a reverse mortgage.
The Department of Housing and Urban Development (HUD),The Federal Housing Administration (FHA),and the lender all have their requirements and rules that must be met when getting a reverse mortgage on a manufactured home.
You have to make three different entitieshappy if you plan on getting a reverse mortgage on a manufactured home.
Manufactured Home Requirements for Reverse Mortgages
The Home Equity Conversion Mortgage Program (HECM) has an extensive list of requirements for manufactured homes to be eligible for a reverse mortgage.
There are several requirements that a manufactured home must meet in order to qualify for a reverse mortgage. The AAG (American Advisor’s Group) provides a complete specification list for obtaining a reverse mortgage on a manufactured home:
1. Your home must have a HUD seal affixed on the outside of the home, which proves that the home conforms to the Federal Manufactured Home Construction and Safety Standards, under HUD code.
2. Your home must be produced after January 1, 1990.
3. Your home must be taxed and classified as real estate and must be designed to be used as a dwelling with a permanent foundation built to FHA requirements.
4. Your home must be in its original location. The only acceptable move the home must have encountered was the move from the factory to the dealer and then to the site. Once on the site, it must have remained there permanently.
5. Your home must have at least a minimum floor area of 800 square feet.
6. Your home must not be in a condominium association.
7. Your home must be built and must remain on a permanent chassis.
8. Any wheels, axles or a hitch must be removed from your home.
9. Your home must be permanently attached to the property.
10. Your home must have acceptable perimeter enclosure (skirting is a must).
11. Beneath your home, the finished grade must be at or above the 100-year flood elevation.
12. Your home must have an engineer’s certificate stating that the foundation meets HUD guidelines.
13. Your home must have permanently installed utilities that have been protected from freezing.
14. Your home must have the affixed HUD tag or data plate, and the appraiser must include the serial number on the appraisal report.
15. Your home must be double wide or bigger.
16. Your mortgage must cover both the unit and its site.
17. You must own the land the home rests on.
18. You must meet any additional requirements specified by your lender and HUD.
Fees Associated with Getting a Reverse Mortgage on a Manufactured Home
FHA appraisals, HUD counseling fees, foundation inspection, insurance, origination fees, and servicing fees are typically required for reverse mortgages.
Once you pass all the requirements listed above, you have a couple more steps to go before getting a reverse mortgage on a manufactured home.These requirements cost upfront before you get the reverse mortgage but can sometimes be added into the mortgage though that reduces your net loan amount.
The FHA will require an appraisal, HUD will want you to becounseled by one of their representatives, and an engineer will need to inspect your foundation. The foundation inspection is required because so many manufactured homes are improperly tied down or permanently installed.
The appraisals will assist in determining the amount you can get through a reverse mortgage. The counseling will ensure you understand what is going on and the inspections are required because so many manufactured homes are improperly tied down (or permanently installed). Origination and servicing fees are profit for the bank and mortgage insurance protects the bank’s investment.
Lending Treeexplains more about getting a reverse mortgage on a manufactured:
Reverse mortgages are offered with fixed as well as adjustable rates. On an adjustable rate reverse mortgage, owners can take the payment as a lump sum, a line of credit, or payments through the remainder of their lives if they remain in the home. While reverse mortgages can be risky, they do provide the borrower with much-needed cash for their senior years. The funds are used at the outset to retire the existing mortgage balance. Then, the remainder of the money may be used as the borrower sees fit: for medical expenses, home repairs, debt consolidation, or senior travel.
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Additional Resources about Getting a Reverse Mortgage on a Manufactured Home
This article is just the bare basics of getting a reverse mortgage on a manufactured home, but it is a start.
The following links will help you learn more about reverse mortgages:
ARLO, the only reverse mortgage calculator of its kind to offer real-time interest ratesby All Reverse Mortgagestates, “Make sure your prefabricated house fulfills the requirements for a reverse mortgage. Then, before making a final choice, get advice on which program to choose.”
The following link is also a calculator that can help you figure out how much your payment could be based on several factors such as home value and interest rate:
In summary, manufactured homes seem to get araw deal when it comes to reverse mortgages just like every other financial and insurance-related activity. It’s always harder to finance and insure manufactured homes so I suppose we should expect to deal with additional requirements and red tape when it comes to getting a reverse mortgage, too.
More Helpful Information about Manufactured Home Financing
18 Home Improvement Loans and Grants for Your Manufactured Home Remodel
Finding Homeowner’s Insurance for Manufactured Homes
The Directory of Mobile Home Manuals
Do you have experience getting a reverse mortgage on a manufactured home? Are you a professional that can provide tips or advice? Please share in the comments below!
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Only certain types of properties qualify for a reverse mortgage. Mobile homes, co-ops, and multifamily homes with more than four units will not qualify. The following types of homes can be eligible: Single-family homes.
You may be disqualified from getting a reverse mortgage if you are below age 62, you have less than 50% equity in your home, or you don't have enough income or assets to afford the ongoing costs such as property taxes and homeowner insurance.
A reverse mortgage increases your debt and can use up your equity. While the amount is based on your equity, you're still borrowing the money and paying the lender a fee and interest.
Reverse mortgages require that applicants be at least 62 years old and own a significant amount of equity in their home. Applicants typically need 50% equity to qualify for a reverse mortgage. There are no credit score or income requirements for reverse mortgages.
Called the initial principal limit, you can only withdraw 60 percent of your available equity during the first 12 months, with the remaining equity becoming available after the first 12 months. The only exception is if your mandatory obligations exceed 60 percent of your available equity.
Just like a traditional mortgage, with a HECM you are borrowing money and using your home as security for the loan. You must continue to pay for property taxes, homeowner's insurance, and make repairs needed to maintain your home or the lender can foreclose on the home.
A reverse mortgage isn't free money: The borrowing costs can be high, and you'll still need to pay for homeowners insurance and property taxes. Reverse mortgages can also complicate life for your heirs, especially if they don't want the home or the home's value isn't enough to cover what's owed.
You need to have a certain amount of equity in your home before you can take out a reverse mortgage. The amount you will need will vary by lender, but typically, you must have at least 50% equity in your home, and sometimes more.
The downside to a reverse mortgage loan is that you use your home's equity while alive. After you pass, your heirs will receive an inheritance based on whatever money you use and interest that accrues on the money you borrow.
A big downside to reverse mortgages is the loss of home equity. Because you're not paying down your reverse mortgage balance, you'll make less profit when you sell, or limit your borrowing power if you need a new loan.
The earliest a homeowner is eligible to take out a reverse mortgage is age 62, but Orman considers it risky to do so. "If you tap all your home equity through a reverse at 62 and then at 72 you realize you can't really afford the home, you will have to sell the home," she said.
If the end of your term is up before you pass away, then you have outlived your reverse mortgage proceeds. With a term payment plan, you reach your loan's principal limit—the maximum that you can borrow—at the end of the term. After that, you won't be able to receive additional proceeds from your reverse mortgage.
Also like a traditional mortgage, when you take out a reverse mortgage loan, the title to your home remains in your name. However, unlike a traditional mortgage, with a reverse mortgage loan, borrowers don't make monthly mortgage payments. The loan is repaid when the borrower.
What is the maximum reverse mortgage loan limit for 2024? The maximum reverse mortgage loan limit will be $1,149,825 in 2024. The limit on the reverse mortgage is not the maximum loan amount but the maximum property value that can be used to calculate your available loan amount.
What Makes Someone a Good Candidate for a Reverse Mortgage? A reverse mortgage may be right for you if you have lots of equity in their home, you have limited income in retirement, and you don't want to leave your house to your heirs (or you have heirs who can pay off the reverse mortgage when the homeowner passes.)
While there is no minimum credit score to be eligible for the loan, you will be subject to a credit check as part of the Financial Assessment. The purpose is to calculate residual income and verify whether or not you have any federal tax liens or delinquent debts that could potentially affect loan eligibility.
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