The qualifications for reverse mortgages in California are no different than in other places in the country. However, California has some key differences once the lender determines the borrower is eligible for a reverse mortgage.
California Reverse Mortgage Borrower Rights
Reverse mortgage borrowers in California have three special rights that are not afforded to reverse mortgage borrowers in other states. These special rights for California reverse mortgage borrowers are:
- Mandatory disclosures. Reverse borrowers must receive a Reverse Mortgage Worksheet Guide and Important Notice to Reverse Mortgage Loan Applicant disclosures from the lender. These disclosures must be received before counseling and before the initial application. In instances where a borrower attends counseling before contacting the loan originator, the counselor must provide the borrower with the disclosures. The borrower must certify these disclosures were received before counseling.
- Seven-day right to cancel. California borrowers have a seven-day cooling-off period after receiving their loan documentation, during which the lender cannot charge fees or accept the application. This gives the borrower time to change their mind. At seven days, if the borrower does not take action to stop the loan, the lender can move forward with the loan. Like in other states, a California borrower also has the right of rescission. If a borrower chooses not to go forward with the loan in this time frame, they can notify the lender, and the loan will be canceled.
- Contract negotiation rights. In California, if the contract negotiation between the lender and the borrower primarily occurs in Chinese, Korean, Spanish, Tagalog, or Vietnamese, the borrower must receive the contract in that language before the borrower signs the final documentation.
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General Reverse Mortgage Eligibility Requirements for All Borrowers
In all states, these are the eligibility requirements for a reverse mortgage.
- Age requirement. Borrowers must meet the minimum age requirement. To qualify for an FHA-insured reverse mortgage, borrowers must be 62 or older. For proprietary mortgages, the age requirements can vary.
- Primary residence. For a reverse mortgage, the borrower must live in the home they own for most of the year.
- Monthly financial requirements. Although the borrower isn’t required to make monthly mortgage payments, the borrower must pay property taxes, homeowner association (HOA) fees, and property insurance to meet the loan’s obligations.
- Eligible property. A borrower can obtain a reverse mortgage on a single-family home, a multi-family home, an FHA-approved condominium, an FHA- and HUD-approved manufactured home—made after 1969, and farms on agricultural land.
- Mandatory counseling. All applicants must complete mortgage counseling with a US Department of Housing and Urban Development-approved agency.
- Substantial equity. Generally, borrowers need at least 50% equity to qualify for a reverse mortgage.
Though California does offer reverse mortgage borrowers several unique rights, for the most part, taking a reverse mortgage in the Golden State is the same as anywhere else in the country.
Seniority is published by Finance of America Reverse LLC. The views expressed in this publication are those of the author alone and do not necessarily reflect the views and opinions of Finance of America Companies. This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.
