Reverse Mortgage Eligibility in Utah

The HECM (Home Equity Conversion Mortgage) reverse mortgage program has specific eligibility requirements set by the Federal Housing Administration. While the basic requirements are straightforward, understanding each one in detail will help you determine whether a reverse mortgage is a viable option for your situation as a Utah homeowner.

Age Requirement: 62 and Older

The most fundamental requirement is age. At least one borrower on the reverse mortgage must be 62 years of age or older at the time of closing. If both spouses are listed as borrowers, the amount of available proceeds is typically based on the age of the younger borrower. Older borrowers generally qualify for a higher percentage of their home's value.

If you are married and your spouse is under 62, you have options. Your younger spouse can be listed as a "non-borrowing spouse" on the loan. While this may reduce the amount you can borrow, it provides important protections that allow the non-borrowing spouse to remain in the home if the borrowing spouse passes away or moves to a care facility.

Home Equity Requirements

You must have substantial equity in your home. While there is no specific minimum equity percentage required by FHA, you generally need enough equity to pay off any existing mortgage balance and still have funds available from the reverse mortgage. Most borrowers have at least 50% equity in their home, though some qualify with less.

The amount you can borrow through a reverse mortgage depends on several factors: your age (older borrowers qualify for more), the appraised value of your home (up to the HECM lending limit of $1,149,825), current interest rates, and the specific HECM product you choose. If you have an existing mortgage, it must be paid off with the reverse mortgage proceeds at closing.

Utah homeowners who have owned their homes for many years often have significant equity due to the state's strong real estate appreciation. This puts many Utah seniors in a favorable position for reverse mortgage eligibility.

Eligible Property Types

Not all properties qualify for a HECM reverse mortgage. The following property types are eligible:

• Single-family homes: The most common property type for reverse mortgages in Utah
• Two- to four-unit properties: You must occupy one of the units as your primary residence
• FHA-approved condominiums: The condo project must be on FHA's approved list or receive a Single Unit Approval
• Manufactured homes: Must meet FHA requirements, including being built after June 15, 1976, and permanently affixed to a foundation

Properties that generally do not qualify include co-ops, vacant land, commercial properties, and mobile homes that do not meet FHA manufactured housing standards. In Utah, some older manufactured homes and certain rural properties may face additional scrutiny during the appraisal process.

Utah-Specific Property Considerations

Utah has a diverse housing stock that includes everything from historic homes in Salt Lake City's Avenues neighborhood to modern developments in Lehi and new construction in St. George. Most single-family homes in Utah qualify for a HECM without issue. However, a few Utah-specific considerations worth noting include:

• Condominiums: Utah has a significant condo market, particularly in ski resort areas like Park City and along the Wasatch Front. Condos must be FHA-approved or obtain a Single Unit Approval to qualify.
• Rural properties: Homes in rural Utah counties may qualify, but the appraiser will need to find comparable sales in the area, which can sometimes be challenging in less populated regions.
• Well and septic systems: Properties on well water or septic systems, common in rural Utah, must meet FHA health and safety standards.
• High-altitude and mountain properties: Homes in mountainous areas qualify as long as they meet all FHA property standards and are accessible year-round.

Primary Residence Requirement

The property must be your primary residence, meaning you live there for the majority of the year. Vacation homes, rental properties, and investment properties do not qualify. After the reverse mortgage closes, you must continue to live in the home as your primary residence.

If you leave the home for an extended period, such as more than 12 consecutive months, the loan may become due and payable. Temporary absences for vacations, family visits, or short-term medical stays are perfectly acceptable. However, if you need to move to a long-term care facility permanently, the loan will typically become due after 12 months.

Financial Assessment

Since 2015, all HECM borrowers must undergo a financial assessment. This evaluation helps the lender determine whether you can meet the ongoing obligations of a reverse mortgage, specifically property taxes, homeowner's insurance, and home maintenance.

The financial assessment evaluates your credit history over the past two years, your income from all sources (Social Security, pensions, investments, part-time employment), your existing debts and financial obligations, and your track record of paying property taxes and insurance on time.

Importantly, the financial assessment is not a traditional income qualification like a conventional mortgage. You do not need to meet a specific income threshold. Instead, the assessment determines whether you can comfortably handle your ongoing obligations. If there are concerns, the lender may establish a Life Expectancy Set-Aside (LESA), which reserves a portion of your loan proceeds to pay property taxes and insurance going forward.

Having a LESA is not a negative outcome. It simply means a portion of your reverse mortgage funds will be allocated to cover these expenses automatically, ensuring you stay in good standing.

HUD-Approved Counseling

Before you can apply for a HECM, you must complete a counseling session with a HUD-approved housing counselor. This requirement exists to protect consumers and ensure you fully understand the terms, costs, and implications of a reverse mortgage.

During the counseling session, the counselor will explain how reverse mortgages work and what alternatives are available, review your financial situation to help you determine if a reverse mortgage is appropriate, discuss the costs including interest, fees, and mortgage insurance premiums, explain the impact on your heirs and estate, and answer any questions you may have.

The counseling can be done in person or by phone. For Utah residents, several HUD-approved agencies offer counseling services. The session typically takes about an hour and costs around $125, though some agencies provide it free of charge. After completing the session, you receive a counseling certificate that is valid for 180 days.

Non-Borrowing Spouse Protections

If your spouse is under age 62, they cannot be listed as a borrower on a HECM. However, current HECM rules provide important protections for non-borrowing spouses. If the borrowing spouse passes away or permanently moves out, the non-borrowing spouse may be able to remain in the home without repaying the loan, provided they meet certain conditions.

These conditions include being married to the borrower at the time of the loan closing and remaining married until the borrower's death or permanent departure, living in the home as their primary residence, and being able to demonstrate they can maintain the home and pay property taxes and insurance.

It is important to note that having a non-borrowing spouse typically reduces the available loan amount, because the calculation accounts for the younger spouse's age. However, the peace of mind of knowing your spouse can remain in the home is often worth this trade-off.

Eligibility Checklist

Use this checklist to quickly assess whether you are likely to qualify for a reverse mortgage in Utah:

• At least one borrower is 62 years of age or older
• The property is your primary residence in Utah
• You own the home outright or have significant equity
• The property is a single-family home, 2-4 unit property, FHA-approved condo, or qualifying manufactured home
• You can demonstrate the ability to pay property taxes, insurance, and maintain the home
• You are willing to complete HUD-approved counseling
• Any existing mortgage can be paid off with reverse mortgage proceeds
• There are no federal tax liens or other disqualifying judgments against the property

If you can check most or all of these items, you are likely a strong candidate for a reverse mortgage. Even if one or two items give you pause, it is worth having a conversation with a reverse mortgage professional to discuss your specific situation.

What Disqualifies You?

While the eligibility requirements are designed to be inclusive, there are some situations that may prevent you from qualifying:

• Being under age 62 (unless your spouse who is 62+ is the borrower)
• The property not being your primary residence
• Delinquent federal debt, including federal tax liens
• The property not meeting FHA minimum standards (without the ability to make required repairs)
• Insufficient equity to pay off existing mortgage balances

Even if you face one of these challenges, there may be solutions. For example, if your home needs repairs to meet FHA standards, those repairs can sometimes be financed through the reverse mortgage itself using a HECM for Purchase or repair set-aside.

Next Steps

If you believe you may qualify for a reverse mortgage in Utah, the next step is a free, no-obligation consultation. We will review your specific situation, answer your questions, and help you determine how much equity you could access. There is no cost and no pressure.