REVERSE MORTGAGE/HECM
Eligible Property Types

A Reverse Mortgage/Home Equity Conversion Mortgage (HECM) is a unique type of reverse mortgage that allows older homeowners to buy a new primary residence using a reverse mortgage. To qualify for this loan, both the borrower and the property being purchased must meet certain eligibility requirements. Here’s an overview of the property types that are eligible for a Reverse Mortgage/Home Equity Conversion Mortgage (HECM).

Single-Family Homes
A single-family home, which is a detached residence designed for one family, is one of the most common property types eligible for a Reverse Mortgage/HECM loan. The home must be the borrower’s primary residence, meaning the borrower must live in it for the majority of the year. These homes are typically straightforward when it comes to meeting the criteria for the Federal Housing Administration (FHA) guidelines, which govern HECM loans.

Multi-Family Homes (Up to Four Units)
Borrowers can also use a Reverse Mortgage/HECM loan on a multi-family home, but it must have no more than four units. In this case, the borrower must reside in one of the units as their primary residence, and the other units can be rented out. This is an attractive option for seniors who want to supplement their income by renting out the additional units.

Townhouses
Townhouses or row houses are attached homes that share walls with adjacent units but are individually owned. These types of homes are also eligible for a Reverse Mortgage/HECM loan as long as they meet FHA standards. The borrower must use the townhouse as their primary residence, and it must meet all property maintenance and safety standards set by the FHA.

Condominiums (FHA-Approved)
Condominiums can qualify for a Reverse Mortgage/HECM loan, but they must be located in an FHA-approved condominium project. This is one of the more restrictive property types for reverse mortgage eligibility. To determine if a condo is FHA-approved, borrowers can check the HUD-approved condo list online. Additionally, the condo must meet the same primary residence and maintenance standards that apply to other eligible property types.

Manufactured Homes (FHA-Approved)
Manufactured homes can qualify for a Reverse Mortgage/HECM loan, but they must meet very specific criteria set by the FHA. The home must be built after June 15, 1976, and must be classified as real property. Additionally, the manufactured home must be on a permanent foundation and meet HUD’s guidelines, including specific requirements for the home’s condition, site location, and proximity to transportation or services. This type of housing often comes with additional inspection and valuation hurdles to ensure it meets FHA standards.

Planned Unit Developments (PUDs)
Planned Unit Developments (PUDs) are communities of homes that may include single-family residences, townhomes, or condos with shared community amenities. These homes can also qualify for a Reverse Mortgage/HECM loan, provided they meet FHA approval standards and the borrower intends to live in the property as their primary residence. The community must comply with HUD regulations regarding governance, such as rules around the homeowners’ association (HOA).

Property Conditions and Inspections
Regardless of the type of eligible property, all homes must meet the FHA’s property standards and pass an appraisal by an FHA-approved appraiser. The property must be in good condition, with no major issues related to health and safety, such as structural defects, faulty wiring, or plumbing problems. If there are issues, the borrower may be required to address them before the loan is approved.

Ineligible Property Types
Certain property types are not eligible for a Reverse Mortgage/HECM loan.

• Vacation homes or second homes: The property must be the borrower’s primary residence.
• Co-ops: Cooperative housing units do not qualify under current FHA rules.
• Bed-and-breakfasts or rental properties where the borrower does not live: The borrower must reside in the property to qualify.
  
  

A variety of property types can qualify for a Reverse Mortgage/HECM loan, from single-family homes to certain manufactured homes and condominiums. The common requirement is that the property must be the borrower’s primary residence and meet FHA standards. It’s important for borrowers to work with a knowledgeable lender and confirm the property’s eligibility early in the process to avoid complications.