Reverse Mortgage Eligibility Screener

The Core Eligibility Requirements Every Borrower Faces

Each requirement below is a federal rule, and each one is a question the screener asks in its own words.

Age. Under 24 C.F.R. § 206.33, "The youngest borrower shall be 62 years of age or older at the time of loan closing." The statute, 12 U.S.C. § 1715z-20(b)(1), defines an elderly homeowner as one who is, or whose spouse is, at least 62, or a higher age HUD may set. HUD's lender guide notes that a non-borrowing spouse must be 18 or older. More detail is in reverse mortgage age requirements.

Principal residence. Under 24 C.F.R. § 206.39(a), the property must be the principal residence of each borrower, and of any Eligible Non-Borrowing Spouse, at closing. The CFPB describes this as living there the majority of the year.

The home itself. The statute requires a dwelling designed principally for a 1- to 4-family residence in which the borrower lives in one unit, and HUD's lender guide adds that the home must meet FHA property standards and flood requirements. HUD publishes the further rules for other home types, such as condominiums and manufactured homes. See reverse mortgage property requirements.

Equity and federal debt. The CFPB says the home must be owned outright or carry a low mortgage balance that can be paid off at closing, using the borrower's own funds or the reverse mortgage. The borrower also cannot owe federal debt, such as federal income taxes or federal student loans, though reverse mortgage money may be used to pay it off. More on a reverse mortgage with an existing mortgage.

Ongoing costs. The CFPB says the borrower must have enough money, or agree to set aside part of the loan at closing, to pay property charges, including taxes and insurance, as well as maintenance and repairs. The lender reviews this.

Counseling. Counseling with a HUD-approved counselor comes before the loan, as explained below.

What Can Disqualify a Borrower

A family reading this list may notice one item that seems to describe their situation. That is a reason for a question to a counselor, not a final answer.

Conditions that can make a HECM unavailable include:

• A youngest borrower under 62. The age is measured at closing.
• A home that is not the principal residence. A vacation home or rental property does not meet the rule.
• A property that falls outside FHA rules. The home must fit the 1- to 4-unit rule and meet FHA property standards.
• Too little equity. An existing mortgage must be paid off at closing, from the loan or the borrower's own funds.
• Federal debt. Unless it is paid off, for example with loan money.
• No counseling. The required session must happen first.

Other events can make an existing loan come due later. Under 24 C.F.R. § 206.27(c)(2), with HUD's approval the balance becomes due and payable, meaning owed in full, if the home stops being a borrower's principal residence for reasons other than death and no other borrower lives there; if illness keeps a borrower away for more than 12 consecutive months and no other borrower lives there; if the borrower does not pay property charges; or if another obligation under the mortgage is not performed.

The 60% Utilization Rule Explained

The question behind the name is simple: can the money be taken all at once? Not always. Federal rules limit how much a borrower on an adjustable-rate HECM can draw in the first year, a limit known in the industry as the 60% rule. HUD sets and publishes the current limit and how it applies.

Under 24 C.F.R. § 206.26(b)(1), during the First 12-Month Disbursement Period, no change to the payment plan may cause disbursements to exceed the Initial Disbursement Limit. The principal limit, the most that can be borrowed under the loan, still includes amounts set aside for repairs, servicing or property charges. HUD's rules also say how the limit treats money needed at closing, such as paying off an existing mortgage.

After those first 12 months, as long as the balance is below the principal limit, a borrower may ask to recalculate payments, switch payment options or draw an amount up to the principal limit minus the balance and any set-asides. The lender may charge a fee for a change, within HUD's ceiling. A borrower with a fixed-rate HECM may not request a change in payment option.

How the Counseling Requirement Works

Counseling can sound like a test, but it is a protection written into the law for the homeowner's benefit. Under 12 U.S.C. § 1715z-20(d)(2)(B), a HECM borrower must receive counseling from an independent third party that is not associated with or paid by anyone involved in making, servicing or funding the loan, or selling annuities, investments, long-term care insurance or other financial or insurance products. Under 24 C.F.R. § 206.41, the borrower, any non-borrowing spouse and any non-borrowing owner must receive counseling.

The statute says the counselor discusses topics including other options besides a HECM, other ways to use home equity such as property tax deferral, the financial effects of the loan, and a disclosure that it may have tax consequences, affect eligibility for federal and state programs, and affect the estate and heirs.

HUD's HECM page lists a counselor roster, the number (800) 569-4287, and agencies that offer telephone and face-to-face counseling nationwide. HUD's lender guide shows that the lender records a HECM Counseling Certificate Number. More on HUD reverse mortgage counseling.

Alternatives Worth Knowing Before You Decide

Each path below trades something different. None is better for every household.

Home equity loan or line of credit. The CFPB notes it may be a cheaper way to borrow against equity, but it usually has monthly payments and depends on income and credit. It has no age-62 rule.

Cash-out refinance. A new, larger mortgage replaces the old one. It also brings monthly payments and its own qualifying review.

Selling or downsizing. This turns equity into cash without a loan, but it means moving.

Property tax relief. Local programs may help older homeowners with property taxes. The county or town tax office publishes its own rules.

A benefits and budget check. The CFPB points to state and local help with utilities, fuel and home repairs. A benefits counselor can look for programs such as Supplemental Security Income, Medicaid or food assistance.

Help from family. A gift or a family loan keeps lenders out, but it carries its own expectations.

The FTC adds that no one has to buy any other financial product to get a reverse mortgage.

Using This Screener: What the Questions Mean

Think of the screener as a set of plain questions that mirror the federal HECM rules above: the youngest owner's age, whether the home is the main residence, what kind of home it is, what is still owed, any federal debt, and whether counseling has happened.

A "yes" means a factor lines up with the general rule. A "no" points to a topic for a counselor. Neither answer is a loan approval, a loan offer, a commitment to lend or a finding that anyone qualifies. Only a lender decides, after its own review and subject to HUD's rules.

The screener covers the HECM program. Proprietary reverse mortgages, which are not FHA-insured, follow requirements each lender sets. After the screener, the usual next steps are HUD-approved counseling and a conversation with a licensed lender. The full set of rules is in reverse mortgage eligibility.