The traditional reverse loan has been available from FHA and is frequently called the HECM, an acronym for Home Equity Conversion Mortgage, but most people in the reverse loan industry simply refer to it as the HECM.
FHA offers government-insured loans to others besides seniors, especially first time home buyers who want to buy a property using an FHA loan because they require smaller down payments and are in general, easier to qualify for and be approved.
First-time buyers sometimes cannot afford a single-family residence, but a Condo could be in their price range, however the development had to be on the approved list with FHA, otherwise, they would not do loans in these projects. And this made it impossible for seniors who live in Condos and would like to have a reverse mortgage but couldn’t get one, due to the status of the development with FHA.
HOA’s would have to go through a very lengthy and expensive process to have their developments approved for FHA loans and most of the time, they just didn’t want to attempt it and sadly, it hurt many seniors who could have benefited financially from a reverse mortgage.
Many years ago, there was a procedure called a “Spot Condo approval” utilized in projects that were not approved under FHA but allowed individual units to be approved, then the agency eliminated that option which was most unfortunate for seniors and Buyers.
The good news is, after waiting many years for it to be reinstated, it will be utilized again and will go into effect on October 15, 2019. This will make it easier for homebuyers to buy into what was a previously an unapproved development, plus seniors will now be able to apply for a reverse loan if they wish to “age in place” in their home.
If a senior is reading this post and you live in a Condo that was not previously approved with FHA, now is the time to consider using a reverse loan to increase your flow of income. Don’t wait but start your loan process in September, just in time to take advantage of the approval process for your Condo.