Seniors with high value homes may qualify for more money with a Jumbo Reverse Mortgage program. The two main types of reverse mortgages are: FHA conforming and non-conforming, the latter commonly known as a Jumbo Reverse Mortgage. An FHA conforming reverse mortgage carries a loan limit of $362,790 in most high-cost counties (although it can vary), whereas a Jumbo Reverse Mortgages generally have loan limits in the millions. An FHA conforming loan limit is the maximum amount of home value that the FHA will recognize in calculating the amount of money that they will lend on the home. Therefore, Jumbos are considered by senior homeowners when the value of their home exceeds the FHA conforming loan limit because they can obtain a larger loan this way.
Jumbo Versus Conforming
Although the Jumbo does not have a loan limit, the FHA reverse mortgage (known as the Home Equity Conversion Mortgage or HECM) offers a much greater percentage of the home's first $362,790 in value. This means that the Conforming reverse mortgage is still the better choice until the home value far exceeds the FHA conforming limit. But if a home's value exceeds the loan limit by a significant amount, the Jumbo can usually offer a larger amount of money. Seniors with high home values- those exceeding the $362,790 limit (or the FHA HECM limit for their county) should definitely explore all of their options.
For Example
A 70 year old with a home that is worth $400,000 in Orange County, California might qualify for $225,000 under the FHA reverse mortgage, while the Jumbo program would only offer $160,000. This shows how Jumbo Reverse Mortgages are much more conservative in the percentage of the value of the home that they will offer. But when the home value is very high, this more conservative lending percentage (known in the industry as "loan-to-value" ratio) will overtake the FHA reverse mortgage. If the 72 year olds home is worth $700,000 for example, then they might qualify for $280,000, which is $55,000 more than the FHA reverse mortgage would offer.
When a Jumbo Reverse Mortgage Makes Sense
Once home value is above the conforming loan limit for the county, the amount of money available under the Jumbo Reverse Mortgage increases, while the FHA program does not change. As a general rule, Jumbos begin to make financial sense when the home is worth at least $200,000 more than the FHA reverse mortgage limit for the county, but there are exceptions for both higher and lower values.
Get a Quote
The loan scenarios above are not an offer to lend and are intended only to illustrate the potential differences between the Jumbo Reverse Mortgage and the FHA reverse mortgage. The examples given may not apply to your particular circumstances. I suggest that you request an FHA or Jumbo Reverse Mortgage quote.
Luke
External Blog: http://reversemortgagescalifornia.activerain.com/
