Written by Tyler Plack
Millions of Americans 62+ are eligible for a HECM loan. Here’s everything you need to know. To be eligible for a reverse mortgage loan, you or your spouse must meet certain requirements set forth by the Federal Housing Administration (FHA) and meet requirements for credit and income.
What are the requirements for a HECM loan?
To qualify for a HECM loan, you would need to meet the following basic requirements:
You or your spouse is 62 years older
You own your home and have a low mortgage balance
Your property is an eligible property type
You meet certain credit and income requirements
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Don’t meet the requirements? You may still be eligible. Talk with a Reverse Mortgage Advisor today.
If you don’t meet the basic requirements for a HECM loan, you may still be eligible for a proprietary reverse mortgage. Proprietary programs may vary, so it is always advised to speak to a reverse mortgage lender.
Age Requirements for a HECM Loan
To be a borrower on a HECM loan, you must be at least 62 years old when the loan closes. There is no maximum age limit for the HECM program.
Documents to Verify Date of Birth
Document Type
Issuer & Description
Issued by the Department of Motor Vehicles (DMV) or the equivalent state agency responsible for licensing drivers and issuing identification cards.
Issued by the Vital Records Office or the Department of Health in the state or territory where the person was born.
Issued by the U.S. Department of State for U.S. citizens and nationals.
Issued by the Social Security Administration (SSA), a federal agency.
Issued by the Department of Defense (DoD) through the Defense Enrollment Eligibility Reporting System (DEERS).
Issued by the state or local election office or Board of Elections in the voter’s jurisdiction.
Issued by U.S. Citizenship and Immigration Services (USCIS), an agency within the Department of Homeland Security (DHS).
Note that it may still be possible to qualify for a HECM loan if one borrower is over the age of 62 as a non-borrowing spouse.
Income and Credit Score Requirements for a HECM Loan
HECM loans do not have credit score requirements, but they have requirements regarding credit history. Credit requirements for the HECM loan are much more flexible than traditional mortgage loans.
When it comes to approving credit history, the Federal Housing Administration writes that lenders must consider how a HECM could be a solution to financial difficulties.
Installment and Housing Payment Requirements
To meet credit history requirements, you must have made all housing and installment debt payments on time for the last 12 months. You may have had up to 2 late payments in the prior 24 months.
Revolving (Credit Card) Payment Requirements
To meet credit history requirements, you cannot have any payments more than 90 days late on credit card (revolving) accounts in the last 12 months. You can have up to 3 payments made 60 days after the due date on credit card accounts.
Cannot Meet Credit Requirements
It is well known and understood that many people seek a HECM loan due to financial difficulties, and lenders must take this information into account when reviewing credit details. At the same time, the lender must consider how a HECM could provide a solution to the borrower’s financial difficulties.
Additionally, lenders can apply Extenuating Circumstances when certain items outside your control have impacted your ability to make your payments.
Income Requirements for a HECM Loan
Just like the credit requirements are somewhat nontraditional, HECM loans uses residual income instead of ratios. The good news is that the residual income component makes it possible for more borrowers to qualify for these loans.
Residual income is the amount of money left over at the end of the day, just like a budget.
Income Calculation on a HECM Loan
For example, if you have $1,200 of Social Security and a $300 pension, the income could be calculated as follows:
| Social Security | $1,200 |
| Pension | $300 |
| Total: | $1,500 |
As you can see, income is simply added from all allowable income sources.
Expense Calculation on a HECM Loan
Now let’s look at the total expenses. The most common expenses that we see include:
- Credit card payments (revolving accounts)
- Installment account payments (personal loans)
- Estimated utility and maintenance expenses
- Property charges (property taxes, homeowner’s insurance, flood insurance, and homeowner’s insurance payments if applicable)
- Federal and state income tax
- Federal Insurance Contributions Act (FICA)
- Alimony and child support payments
- Judgments against the borrower
- Bankruptcy payment plans
- Mortgage obligations for other properties owned by the borrower
Continuing with the example, let’s say that there is $250 per month in credit card payments, $200 per month in property charges, and $300 per month in installment loan obligations. The lender is looking at the monthly payments, not the total amount outstanding on these loans.
Based on this scenario, the lender would calculate the expenses as follows:
Sample Expense Calculation
| Credit cards | $250 |
| Installment loans | $300 |
| Property charges | $300 |
| Total Before Maintenance Expenses: | $850 |
Now the lender must use the square footage of the property to determine the maintenance expense. This is calculated at $0.14 per square foot.
Continuing with the example, let’s say that the home is 2,000 square feet. The lender must calculate the utility and maintenance expenses as below.
Sample HECM Utility/Maintenance Expense Calculation
| Square footage of home | 2,000 | X 0.14 per square foot | $280.00 |
| Monthly Utility/Maintenance Expense | $280 | ||
Residual Income Calculation on a HECM Loan
Now we bring together all the intermediate calculations from our example:
| Total Income | $1,500 |
| Total Expenses | $650 |
| Total Utility/Maintenance Expense | $280 |
| Total Residual Income | $570 |
Click to calculate your residual income based on your situation.
Now that the residual income has been calculated, the lender will determine if it meets the required residual income for the region and family size. The residual income requirements for HECM are based on:
- Family size – this is represented by the number of people living within the home
- Region – the state where the property is located
You can look up the residual income requirements for your state using the table below.
HECM Residual Income Requirements
| Family Size | Northeast | Midwest | South | West |
| 1 | $540 | $529 | $529 | $589 |
| 2 | $906 | $886 | $886 | $998 |
| 3 | $946 | $927 | $927 | $1,031 |
| 4 or more | $1,066 | $1,041 | $1,041 | $1,160 |
Regions and States
| Region | States |
| Northeast | CT, MA, ME, NH, NJ, NY, PA, RI, VT |
| Midwest | IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD, WI |
| South | AL, AR, DC, DE, FL, GA, KY, LA, MD, MS, NC, OK, PR, SC, TN, TX, VA, VI, WV |
| West | AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY |
Even if you are not sure if you qualify, it is often best to speak with a licensed HECM lender. In many cases, a licensed lender can help you qualify by utilizing extenuating circumstances and compensating factors.
To finish our example, we can say that that the sample borrower lives alone (family size of 1) and they are located in Florida, which would place them in the South region. Then, the lender checks if the borrower meets the residual income requirement.
Final Residual Income Result
| Residual income | $570 |
| Residual income required | $529 |
| % of requirement met | 107% |
The borrower meets 107% of the residual income requirement.
Note that there are certain compensating factors that can be applied even if you do not meet the residual income requirement. The HECM program is very flexible, and it is important to speak with a lender that knows the program guidelines and can help you qualify.
Property Eligibility for a HECM Loan
Most common property types are eligible for HECM loans. If you have a single family home, townhome, manufactured home, modular home, FHA-approved condo, 2-4 unit property, or a mixed use property, then the property may be eligible for a HECM loan.
Eligible Property Types
Single family homes Townhomes Manufactured homes (must meet HUD requirements) Modular homes FHA-approved condominiums 2-4 unit properties Mixed use properties
Ineligible Property Type
Cooperative Units (“Co-ops”) Bed and Breakfast properties Boarding houses Manufactured housing that does not meet HUD requirements Non-FHA-approved condominium units where spot approval was denied 5+ unit properties New construction properties without certificate of occupancyCounseling Requirements for a HECM Loan
To be eligible for a HECM loan, it is required for all borrowers complete HECM counseling with a HUD-approved housing counseling agency.
The HECM counselor will discuss various items during the counseling session. Learn more about counseling →
The HECM counseling must be completed and the certificate must be signed before the HECM loan can be processed.