Reverse Mortgage Loans
     		Stimulus Raises Lending Limits to $625,500 to December 31, 2011
    
Consumer Site for Seniors
INSTANT CALCULATOR
 - FIND OUT IF YOU QUALIFY -
Zip Code 
Home Value 
Mortgages 

Age of Youngest Borrower:

  

(OLDER IS BETTER)  

How Much Can You Borrow
  
HUD ANNOUNCES NEW, PERMANENT FHA MORTGAGE LOAN LIMITS
New limits range from $271,050 to $625,500

WASHINGTON - U.S. Department of Housing and Urban Development Secretary Steve Preston today announced the new Federal Housing Administration (FHA) mortgage loan limits for single-family homes as prescribed by the Housing and Economic Recovery Act of 2008.

Beginning January 1, 2009, FHA will insure single-family home mortgages up to $271,050 in low cost areas and up to a maximum of $625,500 in high cost areas. The February 2008 Stimulus Package temporarily raised the FHA maximum to $729,750 through December 31, 2008. The new $625,500 maximum, however, represents a significant increase over the $362,790 limit that was in effect prior to the Stimulus Package.

"In today's environment where access to credit is being restricted, we need to make mortgage loans readily available to households throughout the country, and especially in high-cost areas," said Preston. "These new loan limits will ensure FHA can to continue help struggling homeowners refinance into safe, affordable government-insured loans, and allow many first-time buyers take advantage of today's buyers market"

For several years, FHA's loan levels were below the cost of the average home in communities across the nation. As a result, families who needed FHA mortgage insurance to qualify to buy a home were effectively locked out of the process. In some cases, borrowers turned to exotic subprime loans.

FHA mortgage insurance makes home financing more available to low-income and first time homebuyers. This is because the mortgage is backed by the full faith and credit of the government, freeing lenders from assuming the risk of default.

Higher FHA loan limits do not cost the government any money because the FHA Insurance Fund is fully supported by premiums paid by borrowers who receive FHA-insured mortgage loans.

The Housing and Economic Recovery Act pegs the national conforming mortgage loan limit to a house price index chosen by the new Federal Housing Finance Agency (FHFA). For 2009, the national conforming limit will remain at the current level of $417,000.

The Act says that the new FHA loan limits will be set at 115 percent of the median house price in a given area, as determined by HUD, but can not be lower than 65 percent of the conforming loan limit (the national floor). Also, the FHA mortgage limit cannot exceed 150 percent of the national conforming loan limit (the national ceiling).

Home Equity Conversion Mortgages

The Act also pegs the national mortgage limit for FHA-insured reverse mortgages to the national conforming loan limit. The FHA product known as the Home Equity Conversion Mortgage (HECM) will therefore have a national mortgage limit of $417,000. Unlike the new forward mortgage loan limits, the new HECM loans limits are effective on loans insured or after November 6, 2008. This is the first time that a single limit applies to these mortgages nationwide. As in previous years, the special exception areas of Alaska, Hawaii, Guam, and the Virgin Islands may have higher loan limits. Starting in January 2009 counties in those areas may have loan limits of 115 percent of area median prices, where that amount is above $417,000, up to a ceiling of $625,500.

The size of reverse mortgage loans is determined by the borrower's age, the interest rate, and the home's value. There are also no restrictions on the value of the homes qualifying for a HUD reverse mortgage.

The older a borrower, the larger the percentage of the home's value that can be borrowed. For example, based on a loan at today's low interest rates, a 65-year-old could borrow up to 60% of the home's value, a 75-year-old could borrow up to 70% of the home's value, and an 85-year-old could borrow almost 80% of the home's appraised value.

How do I receive my money?
     
You have 4 options:

Lump Sum
Monthly Payments (your choice of loan advances for a specific period, or for as long as you live in your home)
Line of Credit (unscheduled payments or in installments, at times and in amounts of borrower's choosing until the line of credit is exhausted)
Any combination you would like of the above three choices

When do I repay the loan? Reverse mortgages are designed to eliminate the burden of making monthly mortgage payments. The loan will not be due until you no longer occupy your home as your principal residence. At that time, the money you have borrowed plus the interest and fees will be due and payable. Generally, borrowers or their estate repay the loan by selling the home. If the home is sold, you or your estate may keep the proceeds in excess of the amount due the lender.

The size of reverse mortgage loans is determined by the borrower's age, the interest rate, and the home's value. The older a borrower, the larger the percentage of the home's value that can be borrowed.
 
For example, based on a loan at today's low interest rates, a 65-year-old could borrow up to 60% of the home's value, a 75-year-old could borrow up to 70% of the home's value, and an 85-year-old could borrow almost 80% of the home's appraised value --- up to the FHA loan limit for each city and county.
    
There are no restrictions on the value of the homes qualifying for a HUD reverse mortgage.

When does the loan become due? Reverse mortgages are designed to eliminate the burden of making monthly mortgage payments. The loan will not be due until you no longer occupy your home as your principal residence. At that time, the money you have borrowed plus the interest and fees will be due and payable. Generally, borrowers or their estate repay the loan by selling the home. If the home is sold, you or your estate may keep the proceeds in excess of the amount due the lender.