Reverse Mortgage Qualification, Why Credit And Income Doesn't Matter

Many people falsely believe that their income or credit situation will have an impact on their ability to qualify for a reverse mortgage. This is one of the major differences between conventional and reverse mortgages. With a reverse mortgage, your credit and income is not used for qualification purposes because there are no regular payments required on a reverse mortgage. Using credit and income to qualify the loan is no longer necessary as both these qualifiers are meant to gage the ability and willingness to pay a regular monthly mortgage payment.

So how bad can the credit be without getting rejected for a reverse mortgage? Well, even a borrower currently in bankruptcy could qualify for a reverse mortgage. Specifically while a past bankruptcy won’t prevent a borrower from getting a reverse mortgage, the bankruptcy courts do have to approve any financing being performed by a borrower currently in a bankruptcy. As a result, a borrower who has filed for a bankruptcy which is not discharged or dismissed will need to work with their attorney to get court authorization for the reverse mortgage or wait until the bankruptcy is discharged. A reverse mortgage may also be used to pay off chapter 13 bankruptcies early. This option requires coordination with your loan advisor and bankruptcy attorney and is worth consideration for seniors currently in a chapter 13 bankruptcy.

Collections, late payments and such are also not cause for disqualification. Liens on the property however do need to be considered because they have to be paid off by the reverse mortgage loan proceeds in order for the reverse mortgage to be secured by the property. In most cases the loan proceeds are used to pay off the liens, however if amount of the liens exceed the loan proceeds being offered the borrower may have to pay those liens down at closing in order to qualify.

While income is not used to qualify for a reverse mortgage, a reverse mortgage may be used to supplement income using a modified payment option. This option allows you to receive monthly payments from the lender. The modified payments are non taxable and typically do not affect social security and Medicare benefits because the money is borrowed against your home, and is not earned income.

Money received from a reverse mortgage may be taken as cash at closing in one lump sum, payments over time- similar to taking the lump sum cash and placing it in an annuity, or the borrower may choose to use the loan as a line of credit, only using the money when needed.

Many seniors find themselves in a situation of losing their home or going without thinking there are no long term options available to improve their lifestyle. The often believe a reverse mortgage is not an option due to credit or income limitations. To learn more about reverse mortgages visit my site.