FHA conforming and non-conforming are the two main types of reverse mortgages, the latter commonly known as a Jumbo Reverse Mortgage. When the value of a home exceeds the FHA conforming loan limit for their county, a senior homeowner has the option of a jumbo loan. An FHA conforming loan limit is the maximum amount of home value that Fannie Mae will recognize in calculating the amount of money that they will lend on the home. As in much of California, most counties with high cost homes have a conforming loan limit for reverse mortgages of $362,790.

Jumbo Reverse Mortgages do not have the same value restriction as FHA reverse mortgages, so they can offer a larger amount of money to the borrower when their home value is significantly greater than the conforming limit. When a senior’s home value greatly exceeds $362,790 (or the conforming FHA reverse mortgage limit for their county) they ought to consider all of the available Jumbo Reverse Mortgage programs. Still, the FHA reverse mortgage (known as the Home Equity Conversion Mortgage or HECM) is often the better choice until the home value far exceeds the FHA conforming limit, because it offers a much greater percentage of the home’s first $362,790 in value.

An example of this would be a 74 year old with a home in San Diego County, California that is worth $400,000 might qualify for $225,000 under the FHA reverse mortgage, while the Jumbo program would only offer $160,000. As the example shows, Jumbo Reverse Mortgages are designed to be much more conservative in the percentage of the value of the home that they will offer. In the industry, this more conservative lending percentage is known as “loan-to-value” ratio. Despite the conservative loan-to-value ratio of the jumbo, it will overtake the FHA reverse mortgage when the value of the home is very high. If the 72 year olds’ home is worth $700,000 for example, then they might qualify for $280,000, which is $55,000 more than the FHA reverse mortgage would offer.

The amount of money available under the Jumbo Reverse Mortgage increases as the home value goes up, while the FHA program does not change due to the conforming loan limits. Generally speaking, Jumbos begin to make financial sense when the home is worth over $600,000, but there are exceptions for both higher and lower values. Check with your reverse mortgage lender for a quote and to see if a jumbo reverse mortgage could be right for you.

Author: Luke P Helm
Article Source: EzineArticles.com
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