If you’re seeking reverse mortgage info and have a higher end home, a jumbo reverse mortgage could be a great option for you? A regular jumbo mortgage usually has a set loan amount whereas an FHA reverse mortgage does not have a set loan amount limit. Rather, it has something called a max claim amount, which really means “the max appraised value allowed”.
For example, in 2023 the conforming loan limit is $726,200 in most areas. In High Cost areas, the limits are up to 1.5 times that amount or $1,072,500. Anything that exceeds these amounts would be considered a jumbo loan amount.
First, The Reverse Mortgage Basics
A reverse mortgage is a type of home loan that can only be funded for homeowners that are 55 years of age or older (for proprietary or jumbo reverse mortgages). The minimum age requirement for an FHA reverse mortgage is age 62 plus..
At this time, reverse mortgages can only be done on a homeowner’s primary residence.
The great part is, there are no mortgage payments. Yes, no payments for as long as you live or for as long as you live in your home. You still own your home when you do a reverse mortgage, so you’ll still need to pay property taxes and insurance.
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What is a Jumbo Reverse Mortgage?
A jumbo reverse mortgage is a type of reverse loan that is used if the FHA version doesn’t provide high enough loan proceeds to pay off what the homeowner currently owes. A jumbo reverse mortgage can also be used on free and clear homes.
However, in many cases it can only be used if it provides a larger loan amount than the FHA reverse loan. The jumbo reverse mortgage can really only be used if the amount you can get is greater than the amount you can get on an FHA reverse mortgage.
The percentage lent on the jumbo reverse mortgage is pretty conservative. However, it’s gotten better over the years. Hence, the amount you get isn’t always more than what you’d get with the FHA version. Usually, the jumbo reverse mortgage isn’t a viable solution unless your home is worth $700,000 to $1,000,000 or more. It would just depend on your age (age of the youngest spouse if married).
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The Jumbo Reverse Mortgage Limits
When it comes to the jumbo reverse mortgage loan limits, they are currently set at $4,000,000. For a while, during 2019 – early 2022, many lenders would lend up to $6,000.000 on an exception basis. As the housing market shifts, this may change.
However, not everyone is eligible for that amount. It just depends on your age, home value, and market conditions.
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Jumbo Reverse Mortgage Qualifications
Keep in mind there are many guidelines, but here are some basic jumbo reverse mortgage qualifications:
- First and foremost, for the jumbo reverse mortgage qualifications, there is a minimum age requirement. You must be 55 years old or older. This varies depending on the program and the state you live in.
- It seems like the most challenging of jumbo reverse mortgage qualifications is the equity requirement. You can borrow roughly 28.9% at age 55. On the other side of the age spectrum, an 87 year old can borrow about 51.4% of the value of their home. The older you are, the more you get. It increases just a little bit with each passing year.
- In terms of Jumbo reverse mortgage qualifications, there are no debt to income ratio requirements. There are just residual income requirements. It’s much easier than a regular loan.
- There are some basic credit requirements, but if you’ve paid your housing and installments on time for the last two years, you should be good.
- You can only do a jumbo reverse mortgage on your primary residence.
- Most all properties are eligible. For now, just single family dwellings, condos, townhomes, PUD’s, duplexes, & owner occupied 3-4 unit properties. Jumbo or proprietary reverse mortgages are not available for manufactured homes.
- If you don’t pass the credit and residual income requirements, it doesn’t necessarily disqualify you. It just means you’d need a tax and insurance escrow account.
Jumbo Reverse Mortgage Benefits
Jumbo Reverse Mortgage fees can be less than the FHA version. For example, the FHA reverse loan can have an origination fee ranging from $2500 – $6000. Also, there is a mortgage insurance premium that is 2% of the appraised value. With the jumbo, there is no mortgage insurance premium and sometimes there is no origination fee (depending on how the loan is structured).
The Jumbo program will allow you to access more funds. Some articles posted by non reverse mortgage professionals incorrectly state that the max loan amount for an FHA reverse loan is $1,072,500. This is something called the max claim amount, but it’s not the max loan amount. It works differently than a regular loan and most journalists, bloggers, and even traditional loan officers don’t know how it works. $1,072,500 is basically the max appraisal considered and depending on your age, you get about 35-72% of the max claim amount (assuming your house is worth that or more). Hence, the max FHA reverse loan amount is about $375,000 -$772,000. The jumbo allows for actual loan amounts of $4M – $6M depending on the investor.
This program can be done on non – FHA approved condominium HOA’s. In contrast, in order to do the FHA reverse mortgage on a condominium, the homeowner association needs to be approved by HUD. It’s not the hardest thing ever, but often times HOA’s don’t want to bother with this. Luckily, there are a couple of options for private reverse mortgages that allow you to do a reverse loan even is the HOA is not HUD approved.
Jumbo Reverse Mortgage Drawbacks
The interest rates can be higher than that of the FHA reverse mortgage. The range as of 2023 is 9-10%.
There are less lenders and brokers that are familiar with this program than the FHA version.
For homes valued at $2,000,000 or more, there is a second appraisal required. On the plus side, the investor pays for this. The drawback is that the loan will be based on the lower of the 2 appraisals.
Hopefully, this answer the question – What Is A Jumbo Reverse Mortgage?
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