PROPOSAL

JUMBO LOANS

FUNDAMENTALS

What is it?

A jumbo reverse mortgage is a type of reverse mortgage that exceeds the loan limit imposed by the Federal Housing Administration (FHA) for standard Home Equity Conversion Mortgages (HECMs). The HECM program, insured by the FHA, has certain loan limits that vary by location and are subject to change. If a homeowner’s property value exceeds these limits, they may opt for a jumbo reverse mortgage, also known as a proprietary reverse mortgage.

Here are some key features of jumbo reverse mortgages:

  1. Higher Loan Limits: Jumbo reverse mortgages allow homeowners with high-value properties to access a larger portion of their home equity than what is permitted under the standard FHA HECM limits.

  2. Private Lenders: Unlike HECMs, which are insured by the FHA and subject to government regulations, jumbo reverse mortgages are offered by private lenders. This means that the terms and conditions of these loans can vary between lenders.

  3. Property Requirements: Jumbo reverse mortgages are often available for higher-value homes that exceed the FHA HECM limits. The specific property eligibility criteria can vary among lenders. Loan Terms: The terms of jumbo reverse mortgages, including interest rates, fees, and payout structures, are determined by the private lenders offering these loans. Borrowers should carefully review and compare terms from different lenders.

  1. Financial Assessment: Some jumbo reverse mortgage lenders may have more flexible financial assessment criteria compared to FHA HECMs, allowing homeowners with certain financial profiles to qualify for the loan.

DIFFERENCES BETWEEN JUMBO PRODUCT AND HECM

Age Limit:
HECM: The HECM loan limit is set at 62+.
Jumbo Reverse Mortgage: While each lender has their own set of criteria and qualifying factors, the general age limit for the jumbo reverse is 55+.

Recourse vs. Non-recourse:
HECM: One of the key features of the HECM is the non-recourse feature that insures your never own more that the house is worth. Jumbo Reverse Mortgage: The jumbo product being a proprietary product doesn’t necessarily have this type of protection and thus you are subject to the laws of your state when it comes time to settle an estate. For this reason, it is crucial that you speak to a financial planner on the best way to safeguard your life’s earning and make sure they go where you want them to go.

Loan Limits:

HECM: HECMs are federally insured by the Federal Housing Administration (FHA), and they have maximum loan limits set by the FHA. These limits vary by location and are subject to change. Jumbo Reverse Mortgage: Jumbo reverse mortgages, on the other hand, are not subject to FHA loan limits. They cater to homeowners with higher-valued properties that exceed the limits set for HECMs.

Government Involvement:

HECM: HECMs are government-backed and insured by the FHA. They are subject to federal regulations and guidelines. Jumbo Reverse Mortgage: Jumbo reverse mortgages are provided by private lenders without FHA insurance. While there may be state regulations, they are not governed by federal guidelines to the same extent as HECMs.

Lender Flexibility:

HECM: HECMs follow standardized guidelines set by the FHA, providing a level of consistency across lenders. However, there are still variations in interest rates, fees, and lender offerings. Jumbo Reverse Mortgage: Jumbo reverse mortgages are offered by private lenders, leading to greater variability in loan terms, interest rates, and fees. Borrowers have more flexibility in negotiating terms.

Eligibility Criteria:

HECM: HECM eligibility is based on factors such as age, home value, and financial assessment. The FHA sets certain requirements for borrowers. Jumbo Reverse Mortgage: Jumbo reverse mortgage lenders may have different eligibility criteria. They may be more flexible in terms of financial assessment and credit requirements.

Property Types:

HECM: HECMs are typically available for single-family homes, FHA-approved condominiums, and some manufactured homes that meet FHA standards. Jumbo Reverse Mortgage: Jumbo reverse mortgages may have more lenient property requirements and could be available for higher-value homes or unique property types.

Property Types:

HECM: Interest rates and fees for HECMs can vary between lenders but are influenced by FHA guidelines. Jumbo Reverse Mortgage: Interest rates, fees, and loan structures for jumbo reverse mortgages are determined by the private lenders offering them, resulting in more variability.
It’s important for individuals considering a jumbo reverse mortgage to thoroughly research and understand the terms and conditions of the loan, including any potential risks and benefits. Consulting with a Certified Reverse Mortgage Professional and your financial planner to insure that this product is going to meet your financial needs is a critical component to any reverse product.

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www.reversefinancial.com is a privately owned and maintained website by Brian Bailey who specializes in residential mortgage loan financing and is not a government agency. The information provided herein has been prepared by a third party company and has been distributed for education purposes only. The positions, strategies or opinions of the author do not necessarily represent the positions, strategies or opinions of Patriot Pacific Financial Corp or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.

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