Qualifying for a reverse mortgage used to be easy for anyone who was the right age with enough home equity. Sadly, the credit crunch and recession wreaked havoc with this sector of the home loan market, and by 2012, ten percent of all reverse mortgages were in default, according to The Los Angeles Times. That year, more than $1 billion of taxpayers’ money was poured into a bailout, and, unsurprisingly, tougher regulations soon followed.
It’s important to note that the rules described below apply only to reverse mortgages that are backed by the Federal Housing Administration (FHA). These are called home equity conversion mortgages, or HECMs (pronounced “heck ’ems”). Although these make up the large majority of this type of home loan, private-sector lenders also offer competing products, known as “proprietary” or sometimes “jumbo” reverse mortgages, and each of these has its own individual lending criteria. This means those who can’t or don’t wish to borrow with the HECM, or those with more expensive property who want larger loans may still be able to get a proprietary loan.