- You must have untapped equity in your home. This is value over and above the total owed on the house. If your house is underwater, or worth less than you owe, you cannot qualify for a reverse mortgage. If you have a HELOC or home equity line of credit, this will need to be paid. A second mortgage, tax liens or contractor's liens will interfere with your reverse mortgage as well.
- You must have sufficient funds to pay the closing costs. The closing costs on the HECM or home equity conversion mortgage are more than the HECM Saver, but you will get less income from the Saver. Whichever reverse mortgage you apply for will have closing costs that are substantial. If you do not have enough money on hand to pay the closing costs, the lender may deny your reverse mortgage loan.
- The reverse mortgage has no escrow and requires that you pay the insurance, taxes and upkeep for all the years that you receive the payments. These payments are in addition to utilities and your living expenses. If a review of your finances gives the appearance that you cannot pay for the yearly maintenance and expenses, the lender may refuse to make the loan. If you fail to keep the insurance and taxes paid, the lender can terminate the reverse mortgage and foreclose on your house.
- If your mental status gives the impression that you are not able to carry on your business affairs, the lender may deny a reverse mortgage. You must be of sound mind to sign the contract and paperwork necessary. If it appears that you will not be able to reside in the home, some lenders may choose to deny the reverse mortgage.
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