Can someone with bad credit qualify for a reverse mortgage? Yes, they can because equity in the home replaces the normal credit requirements.
Many adults age 62 or older qualify for a reverse mortgage to buy a new car or pay medical expenses. There are no payments until the person decides they no longer need the money. This is a great help for many older adults living on a fixed income. Unexpected expenses arise from time to time and a little extra money provides peace of mind.
How does it work?
Since the loan is secured by using the equity in the home it does not matter if the applicant has good credit or not. The amount of money the person is eligible for is determined by the amount of equity the home has in it. This amount is dispersed with 3 options available to choose from:
1. One payment made in a lump sum.
2. Spread out over monthly installments
3. An open line of credit
The old standard
With a standard mortgage, the person had to meet the income and credit requirements set by the bank or mortgage company. If a person had bad credit, the only options available were to get a co-signer or wait until their credit score improves to avoid paying the high interest that comes with bad credit loans.
The better option
The reverse mortgage is actually a better option for seniors with limited income. The loan uses the equity in the home in place of credit requirements and the loan is open for as long as the person needs it. If someone with a reverse mortgage passes away unexpectedly, the debt does not transfer to his or her family. With this type of mortgage loan, the person will never lose their home for any reason. The loan is paid back only when it is no longer needed.
Related posts: