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Homeowners 62 and above may qualify for a mortgage that converts home equity to cash without making morgage payments. Often called a reverse mortgage because it pays you, private reverse mortgages (as opposed to Home Equity Conversion Mortgages, or HECMs) can be sold by scammers.

FHA Reverse Mortgages: 5 Tips for Avoiding Trouble

An FHA HECM loan works by converting home equity to cash. These mortgages carry significant up front costs, and may not be compatible with your circumstances and financial goals. Talking with an objective reverse mortgage counselor is required and can help with deciding if a reverse mortgage loan can work for you.

FHA Reverse Mortgages: Avoiding Problems

Here are five tips for avoiding potential problems associated with reverse mortgages:

  • Don't be pressured into getting a reverse mortgage: Family members and complete strangers may suggest that getting a reverse mortgage is in your best interests. Don't give in to pressure from mortgage officers, family members, or anyone else. The only reason for applying for a reverse mortgage is that you believe it's your best home financing option.
  • Ignore unsolicited offers of reverse mortgage lenders: TV commercials, snail mail, e-mail, and phone calls are all venues for offering "great deals" for turning your home equity into "cash you need now." Don't fall for such offers; As with any mortgage, you'll contact lenders when you're ready.
  • Find FHA approved lenders: There are reverse mortgages offered by conventional lenders and private organizations but FHA HECM mortgage loans are offered through FHA approved lenders alone. These lenders must meet FHA criteria and agree to limit fees and offer reverse mortgages in accordance with FHA guidelines.
  • Ignore the extras: One you close an FHA HECM mortgage you may received solicitations of financial products and services. Ignore these offers as they may involve scams designed to do little more than separate you from the cash proceeds of your FHA reverse mortgage.
  • Get the most out of your reverse mortgage counseling session: FHA requires all reverse mortgage borrowers to complete an educational counseling session prior to loan approval. Take notes and ask any questions you can think of. This experience can help you become a savvy reverse mortgage borrower.

Contact FHA approved lenders to learn more about how FHA reverse mortgage loans can assist with achieving your personal and financial goals.


Karen Lawson
Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.