One of the most common questions homeowners have about reverse mortgages is whether their property qualifies. The good news is that many different types of homes are eligible, including single-family residences, certain condominiums, manufactured homes, and even properties with up to four units.
However, not every property qualifies. FHA has specific reverse mortgage property requirements, and the home must meet certain standards regarding occupancy, condition, and eligibility.
Let’s take a closer look at which properties qualify for a reverse mortgage, which ones don’t, and what happens if your home needs repairs.
What Types of Properties Qualify for a Reverse Mortgage?
The FHA-insured Home Equity Conversion Mortgage (HECM) program allows several different types of residential properties.
Single-Family Homes
Single-family homes are the most common type of property used for reverse mortgages. This includes traditional detached homes, certain attached homes, and townhouses.
As long as the property is your primary residence and meets FHA requirements, it may qualify.
Two- to Four-Unit Properties
Many homeowners don’t realize that you can potentially obtain a reverse mortgage on a duplex, triplex, or fourplex.
The important requirement is that you must occupy one of the units as your primary residence.
For example, if you own a fourplex, live in one unit, and rent out the other three, the property may still qualify for an FHA-insured reverse mortgage.
Properties with more than four residential units generally do not qualify for the HECM program.
Condominiums
Yes, you can get a reverse mortgage on a condominium, but there are additional requirements.
Generally, the condominium must be located in an FHA-approved condominium project or qualify for FHA Single-Unit Approval.
If your condominium complex isn’t FHA-approved, that doesn’t necessarily mean you’re out of options. Depending on the project and your individual unit, Single-Unit Approval may be possible.
There are also proprietary reverse mortgage programs that may offer additional condominium financing options outside traditional FHA guidelines.
Manufactured Homes
Certain manufactured homes may qualify for a reverse mortgage, but FHA has additional requirements.
Generally, the home must have been built on or after June 15, 1976, meet applicable HUD construction standards, be installed on an acceptable permanent foundation, and satisfy FHA requirements regarding the property and its classification as real estate.
The home and land ownership arrangements also matter.
Manufactured homes can be more challenging to finance, so it’s important to review the specific property before assuming it qualifies or doesn’t qualify.
Homes With Accessory Dwelling Units (ADUs)
If your property has an accessory dwelling unit, commonly called an ADU or granny flat, you may still qualify for a reverse mortgage.
FHA permits certain residential properties with ADUs, provided they meet applicable requirements.
For example, a single-family home with a permitted backyard guesthouse may be eligible.
The property’s layout, permitted use, appraisal, and compliance with FHA guidelines will help determine eligibility.
Does the Property Have to Be Your Primary Residence?
Yes. For an FHA-insured HECM reverse mortgage, the property must be your primary residence.
That means the home must be where you principally live, rather than a vacation home or investment property.
You can generally travel, visit family, or spend time away from home without automatically violating this requirement. However, extended absences can create problems, particularly when the property is no longer your principal residence.
HECM borrowers must also comply with ongoing occupancy certification requirements.
If you permanently move out, sell the property, or fail to meet certain loan obligations, the reverse mortgage may become due and payable.
What Property Conditions Can Prevent Reverse Mortgage Approval?
Your home doesn’t have to be brand new or completely remodeled to qualify for a reverse mortgage.
However, FHA requires the property to meet certain minimum property standards.
Some common issues that can create problems include:
- Roof leaks or significant roof damage
- Structural or foundation problems
- Unsafe electrical wiring
- Major plumbing issues
- Missing or inadequate heating systems
- Water intrusion or significant moisture damage
- Health and safety hazards
- Certain peeling or deteriorating paint conditions
- Other issues affecting the home’s safety, security, or structural soundness
Minor cosmetic issues generally aren’t the same as serious property deficiencies.
For example, outdated cabinets or worn carpeting may not prevent approval. A significant foundation problem or unsafe electrical system is a different story.
Ultimately, the FHA appraisal and lender review help determine which repairs, if any, are required.
Can You Get a Reverse Mortgage if Your Home Needs Repairs?
Possibly. Needing repairs doesn’t automatically disqualify your property.
Depending on the nature and extent of the repairs, the lender may require them to be completed before closing.
In certain situations, FHA guidelines may allow qualifying repairs to be completed after closing through an approved repair set-aside arrangement.
Not every repair qualifies for this option, and the lender must determine whether the property meets the applicable requirements.
If your home needs work, I wouldn’t automatically rule out a reverse mortgage. It’s worth reviewing the situation before deciding whether the property is eligible.
Do You Need a Home Appraisal for a Reverse Mortgage?
Yes. An appraisal is generally required for an FHA-insured reverse mortgage.
The appraisal serves two important purposes.
First, it helps establish the property’s market value.
Second, the appraiser evaluates the property for conditions that may affect its eligibility under FHA guidelines.
Your home’s appraised value is one factor used to determine how much money may be available through a reverse mortgage.
Other factors include the age of the youngest borrower or eligible non-borrowing spouse, current interest rates, and applicable program limits.
In some cases, an additional appraisal or further property review may be required.
What Types of Properties Do Not Qualify for an FHA Reverse Mortgage?
Some properties are generally ineligible for an FHA-insured HECM reverse mortgage.
These include:
- Vacation homes and second homes
- Properties used solely as investments or rentals
- Properties containing more than four residential units
- Cooperative housing units
- Hotels, motels, and certain transient lodging properties
- Properties primarily used for commercial purposes
- Manufactured homes that do not meet FHA eligibility requirements
- Properties that cannot satisfy applicable FHA property standards
Keep in mind that FHA-insured reverse mortgages and proprietary reverse mortgages are not identical.
Some proprietary programs have different property eligibility guidelines. A property that doesn’t qualify for an FHA HECM may still be worth reviewing for another reverse mortgage option.
What About Homes With Existing Mortgages?
You do not need to own your home free and clear to qualify for a reverse mortgage.
Many homeowners use reverse mortgage proceeds to pay off an existing mortgage.
However, any existing mortgage or other required liens generally must be paid off as part of the reverse mortgage transaction.
The amount of available equity matters because the reverse mortgage must generate enough proceeds, together with any additional funds the borrower contributes, to satisfy the required obligations.
If your current mortgage balance is too high, you may need to bring funds to closing or consider other options.
Property Taxes, Homeowners Insurance, and Ongoing Responsibilities
Qualifying for a reverse mortgage is only part of the process. You also have responsibilities after the loan closes.
With an FHA-insured HECM, you must continue to:
- Pay property taxes
- Maintain required homeowners and applicable flood insurance
- Keep the property in reasonable condition
- Occupy the home as your primary residence
- Comply with the terms of the loan
One important misconception is that a reverse mortgage eliminates all housing expenses.
It doesn’t.
Although borrowers are generally not required to make monthly principal and interest payments while the loan remains in good standing, they remain responsible for property charges and maintenance.
Failure to meet these obligations can cause the loan to become due and payable.
Frequently Asked Questions About Reverse Mortgage Property Requirements
Can I Get a Reverse Mortgage on a Duplex or Fourplex?
Yes. FHA-insured reverse mortgages can be available for eligible properties containing two, three, or four residential units. You must occupy one of the units as your primary residence, and the property must meet applicable FHA requirements.
Can I Get a Reverse Mortgage on a Condo That Isn’t FHA-Approved?
Possibly. Certain condominium units may qualify through FHA’s Single-Unit Approval process even when the entire project isn’t approved. Proprietary reverse mortgage programs may also provide additional options, depending on the property and lender.
Can I Get a Reverse Mortgage if My House Has Foundation Problems?
It depends on the severity of the problem. Significant foundation or structural issues may need to be corrected before the loan can close. An appraisal and lender review will help determine what is required.
Can I Get a Reverse Mortgage on a Manufactured Home?
Yes, certain manufactured homes qualify, provided they meet FHA construction, foundation, ownership, and other property requirements. Not all manufactured homes are eligible.
Can I Get a Reverse Mortgage on a Home With an ADU?
Yes, certain homes with accessory dwelling units may qualify. The property must meet applicable FHA requirements, including standards relating to its configuration and condition.
Does My Home Have to Be Paid Off to Qualify?
No. You can have an existing mortgage, but it generally must be paid off using the reverse mortgage proceeds or other available funds at closing.
Find Out if Your Property Qualifies for a Reverse Mortgage
If you’re considering a reverse mortgage but aren’t sure whether your home qualifies, the best place to start is with a review of your property and your overall situation.
Whether you own a single-family home, condominium, manufactured home, or multi-unit property, there may be options worth exploring.
You can also review our Reverse Mortgage Requirements page for information about borrower eligibility, financial requirements, and other qualifications.
Have questions about your property?
Contact Shawn at (714) 271-8524 to discuss your situation and available reverse mortgage options.
Loan eligibility is subject to applicable FHA guidelines, lender underwriting, property requirements, and program availability. Not all applicants or properties will qualify.