What the FHA requires for a reverse mortgage

The Federal Housing Administration (FHA) insures most reverse mortgages made in the United States through a program called the Home Equity Conversion Mortgage, or HECM. The FHA does not lend the money itself — a bank or mortgage company does — but the FHA guarantees the loan, which means if something goes wrong, the government backs it.

To get an FHA reverse mortgage, you must be at least 62 years old, own your home outright or have a very small mortgage balance, live in the home as your primary residence, and not be behind on federal debt like income taxes or student loans. The FHA also requires you to meet with a HUD-approved counselor before you sign anything, and you must pay an upfront insurance premium (called a mortgage insurance premium, or MIP) that gets added to the loan balance.

The amount you can borrow depends on your age, the value of your home, current interest rates, and the location of the property. Older borrowers and higher home values mean larger loan amounts. The FHA sets a maximum home value it will insure — this limit changes yearly and varies by county.

Key Takeaways

  • You must be at least 62, own your home, live in it as your primary residence, and have no outstanding federal debt to be considered for an FHA reverse mortgage.
  • The FHA requires a meeting with a HUD-approved counselor before closing, and you must pay an upfront mortgage insurance premium that adds to your loan balance.
  • The amount you can borrow is based on your age, home value, interest rates, and the FHA's county-by-county maximum home value limits.
  • You remain responsible for property taxes, homeowners insurance, and home maintenance, and failure to pay these can result in loan acceleration.
  • The loan becomes due when you move, sell the home, or pass away, and your heirs can keep the home by paying back the loan or selling it.

Age, home ownership, and residency requirements

You must be at least 62 years old at the time you close the loan. If you are married, only one spouse needs to meet the age requirement, but both should be on the title if you want both protected. The younger spouse who does not meet the age requirement will not be listed as a borrower, which affects what happens to the loan if the older spouse passes away first.

You must own the home outright or have a mortgage balance so small that the reverse mortgage proceeds can pay it off completely. The FHA will not insure a reverse mortgage if you still owe more than the home is worth or if paying off the existing mortgage would leave you with too little to borrow. You can use the reverse mortgage funds to pay off the old mortgage at closing.

The home must be your primary residence — the place where you live most of the year. A vacation home, investment property, or rental does not may have access to. If you move to a nursing home or assisted living facility for more than 12 consecutive months, the loan becomes due, though some lenders may allow a shorter absence if you intend to return.

The mandatory counseling session and what it covers

Before you can close an FHA reverse mortgage, you must complete a counseling session with a counselor approved by the Department of Housing and Urban Development (HUD). This is not optional, and the lender cannot close the loan without proof that you attended. The counselor is independent — they do not work for the lender — and their job is to make sure you understand what you are signing up for.

The counselor will review the costs of the loan, including the upfront mortgage insurance premium, ongoing insurance premiums, interest rates, and closing costs. They will explain how the loan works, what happens if you cannot pay property taxes or insurance, and what your heirs will owe. They will also discuss alternatives to a reverse mortgage and whether your situation might be better served by a different option.

You can find HUD-approved counselors through HUD's website at hud.gov or by calling 1-800-569-4287. Many counseling sessions are now offered over the phone or online. There is no charge for this counseling — it is paid for by the FHA.

Mortgage insurance premiums and how they work

An upfront mortgage insurance premium (MIP) is required and is typically 2 percent of your home's value or the FHA's maximum claim amount for your county, whichever is less. This premium is not paid out of pocket — it is added to your loan balance, which means you borrow more money to cover it. You will pay interest on this amount for as long as the loan is outstanding.

In addition to the upfront premium, you pay an annual mortgage insurance premium that is calculated as a percentage of your loan balance each year. For most borrowers, this is 0.55 percent of the outstanding loan balance per year. This annual premium is also added to the loan balance rather than paid in cash, so it compounds over time.

The total cost of insurance can be substantial over the life of the loan, especially if you live a long time. A counselor can show you the exact costs for your situation, and you should compare these costs against the benefit of accessing your home equity now.

Property taxes, insurance, and maintenance obligations

Taking out a reverse mortgage does not free you from the costs of homeownership. You remain responsible for paying property taxes, homeowners insurance, and maintaining the home in reasonable condition. If you fail to pay property taxes or insurance, or if the home falls into serious disrepair, the lender can declare the loan due and payable when ready — this is called acceleration.

The lender may require you to set aside funds from the reverse mortgage proceeds to cover property taxes and insurance, or they may monitor your tax and insurance payments. Some lenders use a Life Expectancy Set-Aside (LESA) or Mortgage Payment Set-Aside (MPSA), which means they hold back part of your loan proceeds to pay these costs on your behalf. This reduces the amount of cash you receive upfront but protects you from accidentally defaulting.

You should budget for these costs before taking out a reverse mortgage. If your property taxes or insurance are very high, or if you cannot afford to maintain the home, a reverse mortgage may not be the right choice.

Home value limits and how the FHA sets them

The FHA sets a maximum home value it will insure for reverse mortgages. This limit, called the FHA mortgage limit, varies by county and is adjusted each year. In 2024, the limit ranges from around $498,000 in lower-cost areas to over $1.1 million in high-cost areas like parts of California and New York.

If your home is worth more than the FHA limit for your county, you can still get a reverse mortgage, but the lender will use the FHA limit as the basis for calculating how much you can borrow, not the actual home value. This means you will borrow less than you might if the FHA limit were higher. Some lenders offer jumbo reverse mortgages that are not FHA-insured and have different rules, but these are less common and typically more expensive.

You can find the FHA limit for your county on HUD's website or by asking your lender. The limit is published annually, usually in the fall.

What happens when the loan becomes due

The reverse mortgage loan becomes due when you move out of the home, sell it, or pass away. It also becomes due if you fail to pay property taxes or insurance, or if the home is not maintained. When the loan is due, the full balance — including all the money you borrowed, interest, and insurance premiums — must be repaid.

If you sell the home, the proceeds from the sale are used to pay off the loan first, and any money left over goes to you or your heirs. If you pass away, your heirs can choose to keep the home by paying back the loan themselves, or they can sell the home and use the proceeds to pay it off. If the home is worth less than what is owed, the FHA insurance covers the difference, and your heirs owe nothing.

If you move to a nursing home or assisted living facility, you typically have 12 months to return to the home before the loan is due. Some lenders allow longer absences if you maintain the home and intend to return, but you should clarify this with your lender before taking out the loan.

How to find an FHA-approved lender and get your free guide

Not all lenders offer FHA reverse mortgages, and not all lenders are equally transparent about costs. You can search for FHA-approved lenders on HUD's website at hud.gov/reverse, which lists lenders by state. You can also ask your bank or mortgage company whether they offer reverse mortgages.

Before you contact a lender, schedule your HUD-approved counseling session. You do not need to have a lender lined up first — in fact, it is better to talk to a counselor before you talk to a lender, so you understand the product and can ask informed questions. After counseling, you can shop around with multiple lenders and compare their interest rates, closing costs, and terms.

Ask each lender for a Loan Estimate that shows all costs upfront, including the mortgage insurance premium, interest rate, closing costs, and any set-asides for property taxes and insurance. Compare these estimates side by side. The lowest interest rate is not always the best deal if the closing costs are much higher.

Frequently Asked Questions

Can I get an FHA reverse mortgage if I still owe money on my current mortgage?

Yes, but the reverse mortgage proceeds must be large enough to pay off the existing mortgage completely. The lender will calculate whether this is possible based on your age, home value, and interest rates. If the reverse mortgage is not large enough, you cannot proceed unless you pay off the old mortgage with your own funds first.

What happens to my reverse mortgage if I move to a nursing home?

If you move to a nursing home or assisted living facility for more than 12 consecutive months, the loan becomes due. Some lenders allow longer absences if you maintain the home and intend to return, but you should ask your lender about their specific policy before closing. If you think you might move, discuss this with your counselor.

Can my spouse stay in the home if I pass away?

If your spouse is on the loan as a borrower, they can stay in the home and the loan does not become due. If your spouse is not a borrower, they may have rights under state law, but the lender can require repayment. This is why it is important to discuss your situation with a counselor and your lender before closing.

What if my home is worth more than the FHA limit?

The lender will use the FHA limit for your county, not your home's actual value, to calculate how much you can borrow. This means you will borrow less than you might otherwise. Some lenders offer jumbo reverse mortgages for higher-value homes, but these are not FHA-insured and have different terms and costs.

Can I change my mind after I close the reverse mortgage?

Yes. Federal law gives you three business days after closing to cancel the loan without penalty. This is called the right of rescission. After that period, you can still pay off the loan, but you will owe all the interest and fees that have accrued.