Reverse Mortgage Credit Requirements

Saxton Mortgage does. At least one HECM program we offer has no minimum credit score, but a new credit report is pulled on every loan and your credit and property charge payment history is reviewed. If that history is not acceptable after any extenuating circumstances are considered, a fully funded Life Expectancy Set-Aside is required, and your property taxes and insurance are then paid for you from it.

Not by itself. In our program, a discharged bankruptcy does not affect a HECM on your current home or a HECM-to-HECM refinance, as long as other guidelines are met, though a set-aside may be required if extenuating circumstances are not documented. If you are in an active bankruptcy, the trustee must approve before the loan can proceed. Payments under a bankruptcy plan are counted in your monthly expenses.

Only when you use a HECM to buy a home. Under FHA’s HECM for Purchase rules, a Chapter 7 bankruptcy needs at least two years since discharge at case number assignment, and in that time you must have reestablished good credit or chosen not to take on new credit. A period of 12 months to two years may be acceptable if the bankruptcy was caused by extenuating circumstances beyond your control and you have since shown a documented ability to manage your finances responsibly. A Chapter 13 bankruptcy must be discharged or have at least 12 months of the payout period behind it. If it is not discharged, your payments must have been on time and the bankruptcy court must give written permission.

Court-ordered judgments must be paid off before or at closing, whatever the amount, and the lender also looks at whether the judgment came from a disregard for obligations, an inability to manage debt, or extenuating circumstances. In our program, only judgment liens recorded against the home can be paid from loan proceeds at closing. Judgments not recorded against the home must be paid from your own funds.

CAIVRS is the federal Credit Alert Verification Reporting System. Every borrower is checked against it for delinquent federal non-tax debt, such as a deficiency judgment from a past FHA loan. The lender may not deny a HECM based only on CAIVRS information it has not verified. If a delinquent federal debt is confirmed, our program suspends the loan until it is resolved.

Each outstanding collection or charge-off needs a letter of explanation backed by documentation. For a charge-off, the lender decides whether it came from a disregard for obligations, an inability to manage debt, or extenuating circumstances, but charge-offs are not counted in your monthly expenses. Larger collection balances must be paid off or put on a payment arrangement with the creditor. If no arrangement is available, an estimated payment is counted in your expenses. HECM proceeds cannot pay off debts that are not attached to the home.

It can. FHA tells the lender to pay particular attention to serious derogatory credit, such as foreclosures, bankruptcies and defaults. A foreclosure is reviewed as part of your overall pattern of credit. If your history does not meet FHA’s standard for satisfactory credit and no extenuating circumstances can be documented, a fully funded set-aside is required at minimum.

Mainly when your credit or property charge history is not satisfactory and no extenuating circumstances can be documented. It can also be required when your residual income falls short and a partial set-aside would not be enough to cover the gap. With a fully funded set-aside, the lender pays your property taxes and insurance from loan proceeds, and you still pay other property charges such as HOA dues. If the set-aside funds are insufficient or run out, you are responsible for all property charges. Our program allows it on fixed or adjustable-rate loans, and the lender must still find reasonable assurance that you can manage your obligations.