Financial willingness is an important component of the HECM financial assessment guidelines rolled out in 2014. The goal behind the new guidelines was to reduce defaults resulting from nonpayment of required property charges. Lenders are now required to more extensively analyze a reverse mortgage applicant’s income and credit history.
The financial willingness component of financial assessment takes into account your credit history and property charge payment history. FHA believes that if you manage your debt obligations well and pay your property charges on time, you’re a low default risk. However, if you have a spotty history of paying bills, you’re likely a greater default risk.
Your credit history is important when qualifying for a HECM, but the HECM credit guidelines are generally more lenient than for many traditional forward mortgage programs. You don’t need to have perfect credit to get a reverse mortgage. In fact, reverse mortgage lenders don’t even care about your credit scores. As long as you pay your bills (including property charges) at least reasonably well, you’ll typically have no problem qualifying from a financial willingness standpoint.
If your credit history or property charge payment history is bad, you may still be able to qualify with a valid extenuating circumstance or a life expectancy set-aside (LESA).
Check your credit before applying
If you’re planning to apply for a reverse mortgage (or any home loan, for that matter), it’s always a good idea to check your credit ahead of time. That way you can catch any errors or solve any issues before they become a problem during the application process.
You can get your credit report for free once per year at the federally-sanctioned website annualcreditreport.com.
