A reverse mortgage draws on home equity, and how much you can borrow depends largely on your home’s value and the youngest borrower’s age.
The U.S. Department of Housing and Urban Development’s financial assessment rules for lenders add a second question: Is the borrower willing and able to keep up with the costs of owning the home?
What lenders review
Those rules now sit in HUD’s Single Family Housing Policy Handbook, which replaced the stand-alone 2016 guide in 2024, and HUD updated the instructions in FHA Connection, the agency’s online system for lenders, for the assessment in January 2026. Lenders look at four things.
First, they look at the overall pattern of credit behavior rather than a single late payment.
The second is the record on property taxes, homeowners insurance and any homeowners association fees, where late payments are treated as especially significant.
The third is income, which must be documented, verified and reasonably likely to continue for at least three years.
The fourth is residual income: what is left after expenses and property charges; it must meet a standard set by region and family size.
If you are already considering a reverse mortgage, and you are 62 or older and own your home, Longbridge Financial, a top-rated reverse mortgage lender, offers a free quote showing exactly what you would qualify for. A licensed specialist then explains the cost, how repayment works, and what it means for your heirs.
Straight answers, no obligation. Get the facts in about two minutes.
Get your file ready
Most of the review rests on paperwork you can assemble before you apply. Pull your credit reports and check them for errors. Bring property tax and insurance payments current, and keep proof of each. Gather documents showing income, such as Social Security award letters, pension statements, and annuity statements.
Then ask the lender two direct questions: what the loan would cost, and whether your file would require setting aside funds for future taxes and insurance.
Taxes and insurance stay your job
A reverse mortgage does not end the obligations that come with owning a home. Borrowers must keep paying property taxes, homeowners insurance and maintenance, and the loan comes due when the last borrower leaves the home. The rules differ for a spouse who is not on the loan.
HUD-approved counseling is required before a federally insured loan like this closes.
Because property taxes and insurance stay the borrower’s responsibility, HUD created a set-aside to cover them. A life expectancy set-aside, or LESA, reserves part of the loan to pay projected property taxes and homeowners insurance over the borrower’s life expectancy.
Under HUD’s rules, a lender that finds an unsatisfactory payment history with no documented extenuating circumstances must require, at minimum, a fully funded set-aside.
The FHA Connection form lists four settings: not required, voluntary and fully funded, required and fully funded, and required and partially funded. A borrower with a clean record may still choose to fund one.
Add a Comment