Reverse mortgages are specialized loans available to homeowners age 62 and older. Over the years they have become a useful financial tool for a wide range of retirees, from those looking to supplement a fixed income, to homeowners who want to protect other retirement assets, or even those planning to purchase a new home later in life.

But while reverse mortgages can be flexible, there are still some important requirements when it comes to the property itself.

Which Types of Homes Are Eligible?

According to the Federal Housing Administration (FHA), which insures most reverse mortgages through the Home Equity Conversion Mortgage (HECM) program, several types of homes may qualify.

Eligible properties generally include:

• Single-family homes

• Two- to four-unit homes, as long as the borrower occupies one of the units as their primary residence

• Certain condominiums, provided the project meets FHA approval guidelines

• Some manufactured homes, if they meet HUD construction and foundation standards

These requirements help ensure the home meets federal property standards and maintains long-term value.

Using a Reverse Mortgage to Purchase a Home

Many people are surprised to learn that reverse mortgages can also be used to purchase a home. Through the Reverse Mortgage for Purchase program, eligible borrowers can buy a qualifying property and eliminate monthly mortgage payments.

Homes purchased using this option typically must be:

• A single-family home or approved condominium

• A two- to four-unit property where the borrower occupies one unit

• Fully completed construction with a certificate of occupancy

This program has become increasingly popular for retirees who want to downsize, relocate, or move closer to family without taking on a traditional mortgage payment.

Why Might a Home Not Qualify?

While many homes are eligible, there are situations where a property may not meet reverse mortgage guidelines.

For example:

• Very little home equity may limit eligibility, although homeowners can still qualify even if they currently have a traditional mortgage balance.

• The property must meet basic maintenance and safety standards. Significant repairs or deferred maintenance may need to be addressed before the loan is finalized.

• The home must be the borrower’s primary residence. Vacation homes or investment properties do not qualify.

Borrowers must also remain current on ongoing home-related expenses such as property taxes, homeowners insurance, and HOA dues if applicable.

Reverse mortgages allow homeowners to convert a portion of their home equity into funds that can be accessed in several ways, including a lump sum, monthly payments, or a line of credit. They can also be used as part of a home purchase strategy later in life.

Because every situation is different, it’s helpful to speak with a knowledgeable reverse mortgage specialist who can review your property, explain the options available, and help determine whether your home meets the program guidelines.

Jan and Kelsey are Reverse Mortgage Specialists serving the Erie, Dacono, Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado, as well as the Cheyenne and Laramie communities of Wyoming.  Contact Jan and Kelsey to learn if a reverse mortgage is right for you.