HECM Requirements: Who Qualifies for an FHA Reverse Mortgage in 2026

What a HECM reverse mortgage is and who it fits

A Home Equity Conversion Mortgage (HECM) is the reverse mortgage insured by the Federal Housing Administration. It lets a homeowner age 62 or older convert part of the home’s equity into cash without a monthly principal and interest payment. The loan balance grows as interest and fees accrue. Repayment can be triggered by a sale, permanent move, death, or failure to meet loan obligations, subject to eligible spouse protections.

HECMs fit homeowners who have significant equity, plan to stay in the home long term, and can keep up with property taxes, homeowners insurance, and maintenance. They do not fit a short holding period or a borrower who may struggle with those ongoing obligations. HECM requirements include borrower, property, and financial rules set by HUD. Counseling is required before the lender can process the application beyond HUD’s permitted preliminary steps.

For a general primer, see reverse mortgage basics and how a reverse mortgage works.

HECM requirements for borrowers

Age 62 or older

Every borrower on the HECM must be at least 62. For a couple, both spouses can be borrowers if both meet the age and other eligibility rules. A surviving co-borrower retains access to proceeds available under the payment plan while meeting the loan obligations.

Eligible non-borrowing spouse

If one spouse is under 62, that spouse can be listed as an eligible non-borrowing spouse (NBS). HUD rules let an eligible NBS stay in the home after the borrowing spouse dies, with the loan deferred, as long as the NBS was the spouse at closing, remained married to the borrower until death, is named in the loan documents, and continues to meet principal-residence and other loan obligations. The NBS does not receive loan proceeds and cannot draw from the line of credit after the borrower’s death.

An eligible NBS younger than the borrower can reduce the initial principal limit because HUD uses the age of the youngest borrower or eligible NBS.

Principal residence

The property must be the borrower’s principal residence. A second home, vacation home, or investment property does not qualify. For a traditional HECM, it must be the principal residence at closing. HECM for Purchase allows occupancy within 60 days.

U.S. residency and no delinquent federal debt

Eligible residency categories include U.S. citizens, lawful permanent residents, and citizens of Micronesia, the Marshall Islands, or Palau. Delinquent federal non-tax debt must be resolved with the creditor agency. Federal tax debt has separate rules that can permit a documented repayment agreement or payoff.

Property requirements

A HECM can be made on:

• A one- to four-unit property, where the borrower occupies one unit as the principal residence.
• An FHA-approved condominium. Single-unit approval (also called spot approval) is available for an eligible condo in a project that is not fully approved.
• A manufactured home that meets FHA rules: built on or after June 15, 1976, on an eligible permanent foundation and classified as real estate. HUD certification-label and data-plate requirements apply, with specified verification alternatives if they are missing.
• A planned unit development (PUD) that meets FHA requirements.

Co-ops are not eligible. The home must meet FHA minimum property standards. Required repairs flagged by the appraiser must be completed, and in limited cases HUD allows a repair set-aside at closing to cover work after funding.

Equity and existing mortgage payoff

A HECM must be in first lien position. Existing mortgages usually must be paid off, often with HECM proceeds. HUD permits some existing liens to remain if they meet its subordination and other rules. Available proceeds must cover required payoffs and costs, or the borrower must supply additional funds.

The maximum claim amount (MCA) is the lesser of the home’s appraised value and the HECM national lending limit. For calendar year 2026, HUD set the HECM lending limit at $1,249,125 for all areas, including Alaska, Hawaii, Guam, and the U.S. Virgin Islands (HUD Mortgagee Letter 2025-22). A borrower with a home worth more than that number does not get credit above the limit for HECM sizing. Owners of higher-value homes sometimes look at a proprietary (jumbo) reverse mortgage for that reason, discussed briefly below.

HUD-approved counseling

Each borrower, non-borrowing spouse, and non-borrowing owner must receive HUD-required HECM counseling. A lender may accept an application before counseling, but cannot obtain an FHA case number or proceed beyond permitted preliminary processing until it receives the signed counseling certificate. Counseling can be in person or by phone. Fees vary by agency and must be reasonable without creating financial hardship; ask about a reduction or waiver. The counselor reviews how a HECM works, the costs, alternatives, and the borrower’s financial picture. The borrower receives a signed certificate that is valid for 180 days.

Lenders cannot steer the borrower to a specific counseling agency. HUD publishes the list.

Financial assessment

HUD requires a financial assessment on every HECM application to confirm the borrower can meet ongoing property charges. The assessment covers:

• Credit history: pattern of paying mortgages, property taxes, insurance, and other revolving and installment debt. The lender evaluates the payment record under HUD’s standards, including any documented extenuating circumstances.
• Property charge history: on-time payment of real estate taxes, homeowners insurance, HOA dues, and flood insurance where required.
• Residual income: cash left each month after housing expenses, debts, and estimated maintenance and utility costs. HUD publishes residual income thresholds by family size and region.
• Extenuating circumstances and compensating factors: documented reasons for past credit issues, offsetting assets, or stable retirement income.

If the borrower does not meet residual income or credit standards, HUD rules may require a Life Expectancy Set-Aside (LESA). A set-aside does not guarantee approval; the lender must still assess whether the loan is sustainable. A LESA carves out part of the principal limit to pay future property taxes and insurance. A fully-funded LESA has the servicer pay those charges directly; a partially-funded LESA sends semiannual payments to the borrower, who must cover any shortfall and pay the charges. A LESA reduces the cash available at closing and over time, so it is a meaningful trade-off.

Principal limit factors in plain terms

The initial principal limit is the starting amount before costs, payoffs, and set-asides. It equals the maximum claim amount multiplied by HUD’s Principal Limit Factor (PLF). The calculation uses:

• The age of the youngest borrower or eligible non-borrowing spouse. Older ages generally produce a higher PLF.
• The expected interest rate. For adjustable-rate HECMs, it is the lender’s margin plus the weekly average 10-year Constant Maturity Treasury yield. For fixed-rate HECMs, it equals the note rate.
• The maximum claim amount (the lesser of the appraised value and the 2026 limit of $1,249,125).

An older age or lower expected rate generally supports a higher PLF and initial principal limit. HUD publishes current PLF tables; lenders use them directly in the quote.

Payout options

HECM borrowers choose how to receive the proceeds:

• Lump sum: a one-time disbursement at closing. The single-disbursement payment plan is available only with a fixed-rate HECM.
• Tenure: equal monthly payments while at least one borrower lives in the home as the principal residence and the loan remains in good standing.
• Term: equal monthly payments for a selected number of years.
• Line of credit: funds the borrower can draw on demand. The unused credit line grows at a rate based on the note interest rate plus the annual mortgage insurance rate. This increases borrowing capacity; it is not interest earned on savings.
• Modified tenure or modified term: a line of credit combined with monthly payments.

Adjustable-rate HECMs offer the monthly-payment and credit-line plans. A borrower can draw available credit at closing, subject to disbursement limits. Fixed-rate HECMs allow only the single lump sum, with no later draws.

For a traditional HECM, the first-year limit for an adjustable-rate loan, or the closing advance for a fixed-rate loan, generally starts with the greater of 60% of the principal limit or mandatory obligations plus 10% of the principal limit. It cannot exceed the principal limit after applicable LESA and servicing set-asides. Payoffs and financed costs count toward the limit.

Costs and insurance premiums

HECM costs include:

• Initial mortgage insurance premium (MIP): 2% of the maximum claim amount, paid to FHA at closing. Assuming a maximum claim amount of $1,249,125 under the 2026 limit, the initial MIP alone is $24,982.50, excluding all other costs.
• Annual MIP: 0.5% of the outstanding loan balance, accrued monthly and added to the balance. HUD’s August 2026 Handbook 4000.1 lists both rates.
• Origination fee: capped by HUD. The maximum permitted fee is the greater of $2,500 or 2% of the first $200,000 of the maximum claim amount plus 1% above $200,000, subject to a $6,000 overall cap. Lenders may charge less.
• Third-party closing costs: appraisal, title, recording, and similar line items.
• Servicing fee: some loans include a monthly servicing fee, capped by HUD.

Most costs can be financed into the loan. That reduces cash to close but also reduces the available principal limit.

Ongoing obligations and repayment triggers

A HECM is non-recourse: the lender’s recovery is limited to the home, rather than the borrower’s or estate’s other assets. The borrower still has to:

• Pay property taxes on time.
• Keep homeowners insurance (and flood insurance where required) in force.
• Occupy the home as the principal residence.
• Keep the home in reasonable repair.
• Pay HOA or condo dues where applicable.

A HECM becomes due and payable when:

• The last surviving borrower dies, or in the case of an eligible non-borrowing spouse, the deferral conditions are no longer met.
• The home is sold, or all borrowers transfer their entire interest in it. Some permitted transfers do not trigger repayment.
• No borrower maintains the home as a principal residence. The 12-consecutive-month allowance applies to an absence caused by physical or mental illness, not every move. An eligible NBS may qualify for protection when the borrower enters long-term health care.
• The borrower fails to pay property charges or maintain the home.

After a due-and-payable notice, heirs should contact the servicer immediately. CFPB describes an initial 30-day period to buy, sell, or turn over the home, with possible extensions. Heirs who want to keep it can satisfy the HECM for the lesser of the balance or 95% of the appraised value. They keep any equity remaining after a sale and payoff.

HECM for Purchase in one section

HECM for Purchase (H4P) lets a buyer 62 or older use a HECM to buy a new principal residence in a single transaction. The buyer supplies the required investment from permitted funds. The amount depends on the price, appraised value, youngest borrower’s or eligible NBS’s age, expected rate, and costs. The maximum claim amount also cannot exceed the purchase price. There is no monthly principal and interest payment on the HECM.

The buyer must occupy the home within 60 days, meet the same financial assessment and counseling rules, and the property must meet FHA standards. It can help a buyer relocate or downsize. For context on alternatives, see when a reverse mortgage makes sense and 6 ways seniors can tap home equity.

Proprietary (jumbo) reverse mortgages

Private lenders also offer proprietary reverse mortgages, which are not FHA-insured. Their eligibility rules, costs, and protections differ. A homeowner comparing one with a HECM should review the lender’s written terms and discuss the differences during counseling.

Application timeline, step by step

1. Initial inquiry and quote: the lender runs a quote using the youngest borrower’s or eligible NBS’s age, home value, and current expected rate to show the principal limit, payout options, and estimated costs.
2. HUD-approved counseling: borrower, any non-borrowing spouse, and any non-borrowing owner complete the session and receive the certificate.
3. Application: the lender may accept the application before counseling, but must receive the signed certificate before obtaining the FHA case number and proceeding beyond permitted preliminary steps.
4. Appraisal: an FHA-approved appraiser values the property. HUD’s collateral risk assessment may require a second appraisal.
5. Underwriting and financial assessment: credit, property-charge history, residual income, and documentation of income and assets. The underwriter decides whether a LESA is required.
6. Settlement statement and signing: review the HUD-1 settlement statement and loan documents. A non-purchase HECM generally has a three-business-day cancellation period after signing and receipt of required disclosures. HECM for Purchase has no federal rescission right.
7. Funding and disbursement: after rescission, funds disburse based on the elected payout option. Mandatory obligations (payoff of any existing mortgage, closing costs, initial MIP) come out first.

Ask the lender for a timeline that accounts for counseling, appraisal, repairs, title work, and underwriting.

Where to go from here

The next practical step is a written quote from a HUD-approved HECM lender, using the youngest borrower’s or eligible NBS’s date of birth and the quoted expected rate, so the principal limit and the available payout options are specific to the household. For broader context on how retirees use home equity, see reverse mortgages for seniors.