Discover why credit scores and income are irrelevant when qualifying for a reverse mortgage. Homeowners with poor credit and no income can qualify.
The unique benefits available from a reverse mortgage help many retirees fund a comfortable lifestyle. In most situations, borrowers gain access to a line of credit without a corresponding duty to make monthly payments. In one sense, a home begins making payments to homeowners without regard for current income received.
The Reverse Mortgage Approval Process
The current value of a home is a primary consideration for all lenders. In addition, the amount of existing loans, the age of all homeowners, and current interest rates also play a vital role in the approval process. Because no payments are made on a reverse mortgage, current income and FICO scores are not considered during approval. In almost all situations, the current value of a home must be sufficient to repay all existing loans and additionally justify a new line of credit.
Repayment of a reverse mortgage is limited to home value when the last borrower permanently leaves. Because of this unique repayment requirement, lenders evaluate home value carefully. Older applicants who have substantial home equity receive the best interest rates and highest loan approvals. This general rule applies equally to all applicants regardless of credit scores and current incomes.
Repayment Procedure
Payment is due when the last borrower vacates the home. Repayment requires reimbursement of all principal advances and accrued interest from the inception of the loan. In most cases, repayment is delayed until the death of the last remaining spouse.
The estates of borrowers are not liable for repayment. Upon the death of the last remaining occupant, heirs may choose to keep the home and repay all amounts due. Alternatively, heirs may surrender the home in full satisfaction of amounts owed without personal responsibility.
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