Reverse Mortgage Limits: Facts to Consider

By Igor Buces

When applying for a reverse mortgage, you might desire to know about the reverse mortgage limits. These limits could affect you depending on the value of the home. Actually, there are "hard" limits and "soft" limits.

A hard limit is the upper barrier set by the FHA. At this time, 90 percent of reverse mortgages are FHA backed. Therefore, the limits set by the FHA are very important.

At this time, the FHA upper limit varies from $200,160 and $362,790. The lower limits are used for rural areas and the upper ones for big cities or states where the living cost is more expensive. Also, the limit can be adjusted up to 150 % in Alaska, Guam, Hawaii and the Virgin Islands.

These limits are modified every year. Still, to get a realistic picture of how much you can borrow, you need to understand about the soft ceilings. Soft limits veto homeowners of high price homes to borrow more than those with homes valued at the FHA boundary and also set the actual amount you can get.

The soft boundary can be considered the actual limit for your house since it will set how much you can borrow. The amount that you can borrow is calculated from the lower of the appraised worth and the FHA boundary.

The real money homeowners can get depends on their age, the present rate, different mortgage costs and the appraised value of their house or FHA's home ceilings for their region. Usually, the more worth your house is, the older you are, and the lower the rates, the more you can get.

For instance, owners with a $100,000 loan at 9% interest could borrow up to 22% of the home's worth if they are 65. If the owners are 75, they could borrow up to 41%, and up to 58% if they are 85 years old.

In addition, consider that there are no asset or income limitations on borrowers getting a HUD's reverse mortgage. This basically means that you may have poor credit or earn no money or too much money and still be able to qualify for the loan. Nobody can be excluded because income, assets, or bad credit.

So, before you get a home loan, discuss it with your specialized mortgage broker about the reverse mortgage limits so that you can have a better representation of how much money you can receive by apply for this kind of mortgage.

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