What Disqualifies You From Getting a Reverse Mortgage? (w/Examples) + FAQs

You can be disqualified from getting a reverse mortgage for four main reasons: being under age 62, not having enough home equity, owning the wrong type of property, or failing a mandatory financial assessment. The central conflict arises from the Federal Housing Administration’s (FHA) strict property and financial standards, which were created to prevent the high foreclosure rates that plagued earlier versions of these loans. The immediate negative consequence is that these protective rules can block cash-poor seniors from accessing their home’s equity, even when they need it most.

This problem is significant, as a report from the Consumer Financial Protection Bureau (CFPB) found that nearly 10% of reverse mortgage borrowers were at risk of foreclosure simply for failing to pay property taxes and homeowners insurance. These are the exact ongoing costs the new rules are designed to screen for.

Here is what you will learn to navigate this complex process:

🔍 The four non-negotiable pillars of eligibility that every applicant must meet.
🏠 How a simple, unfixed home repair can completely derail your application and what to do about it.
💰 The financial tripwires, like old debts or low income, that lead to denial even if you have a perfect credit score.
❤️ The hidden dangers a reverse mortgage poses to a younger, non-borrowing spouse and how to protect them.
📝 Actionable steps you can take to fix the problem if your application is rejected.

Deconstructing the Reverse Mortgage: Who and What Are Involved?

A reverse mortgage is a loan that allows homeowners 62 or older to turn their home equity into cash without having to make monthly mortgage payments. The loan is repaid only when the last borrower sells the home, moves out, or passes away. The most common type, making up over 95% of the market, is the Home Equity Conversion Mortgage (HECM), which is insured by the federal government.

Understanding who does what is critical. The U.S. Department of Housing and Urban Development (HUD) is the federal agency that sets the rules for the HECM program. A division of HUD, the Federal Housing Administration (FHA), insures the loan, which protects the lender—not you—if the home’s sale price doesn’t cover the loan balance.

The Lender is the bank or mortgage company that provides the money and services the loan throughout its life. Before you can even apply, federal law requires you to speak with a HUD-Approved Counselor, an independent expert who explains the loan’s risks and costs to ensure you understand what you are signing up for. Finally, an FHA-Approved Appraiser will assess your home’s value and physical condition to make sure it meets minimum safety standards.

The Four Pillars of Eligibility: The Absolute, Unbreakable Rules

Getting a reverse mortgage requires clearing four foundational hurdles. These are not suggestions; they are firm requirements set by HUD for its HECM program. Failing to meet even one of these will result in an immediate disqualification.

Pillar 1: The Age Gatekeeper (You Must Be 62 or Older)

The most straightforward rule is the age requirement. The youngest borrower on the loan application must be at least 62 years old to qualify for a HECM. Lenders are required to verify your age, and there is no flexibility on this point. This rule exists because the loan was designed specifically as a financial tool for seniors in retirement.

Some private lenders offer “proprietary” reverse mortgages to homeowners as young as 55, but these are not insured by the FHA and often come with stricter financial requirements and fewer consumer protections. For the vast majority of applicants seeking a federally-insured HECM, 62 is the magic number.

Pillar 2: The Equity Threshold (You Need to Own a Big Piece of Your Home)

You must own your home outright or have a very large amount of equity, typically at least 50%. The reverse mortgage must be the first and only loan against your property. This means any existing mortgage you have must be paid off at closing, using the money from the new reverse mortgage.

This is a major disqualification point. If the amount you can borrow from the reverse mortgage isn’t enough to completely pay off your old mortgage plus the closing costs, your application will be denied. The only way around this is if you can pay the difference in cash at closing, which is often not possible for seniors seeking the loan in the first place.

Pillar 3: The Principal Residence Rule (This Must Be Your Main Home)

The property you are borrowing against must be your principal residence, meaning you live there for the majority of the year. This rule reinforces the program’s goal of helping seniors “age in place.” Because of this, vacation homes, rental properties, and second homes are automatically disqualified.

After you get the loan, you must certify every year that you still live in the home. If you move into a nursing home or other facility for more than 12 consecutive months, the loan becomes due and payable, which can force the sale of your home.

Pillar 4: The Property Type and Condition Test (Your Home Must Qualify, Too)

Not every home is eligible for a HECM. The FHA has strict standards to ensure the property is safe, structurally sound, and marketable. Eligible properties generally include single-family homes, 2-to-4 unit properties (if you live in one unit), and HUD-approved condominiums.

Properties that are almost always disqualified include cooperative apartments (co-ops), most manufactured homes built before June 15, 1976, and homes on commercial land like a working farm. Furthermore, the home must be in good condition. An FHA appraiser will inspect it, and if they find major issues like a failing roof or peeling paint, those problems must be fixed before the loan can close.

Why People Get Denied: A Deep Dive into Disqualification Factors

Beyond the four pillars, several other specific issues can cause an application to be rejected. These factors fall into categories related to your finances, your property’s specific details, and your personal situation.

Financial Disqualifiers: When the Numbers Don’t Add Up

These are the most common and complex reasons for denial. They focus on your ability to not only get the loan but also to handle the financial responsibilities of homeownership for the rest of your life.

Delinquent Federal Debt: You cannot have any outstanding debt owed to the U.S. government, such as unpaid federal income taxes or a defaulted federal student loan. This is a firm rule because the government will not insure a new loan for someone who has failed to pay back a previous one. However, this is often a “soft” disqualifier, as you are allowed to use the proceeds from the reverse mortgage to pay off the federal debt at closing.
Failing the Financial Assessment: This is the biggest hurdle for many applicants. Since 2015, every HECM applicant must undergo a detailed financial review. Lenders are not looking at your credit score; they are analyzing your income, assets, and credit history to see if you have the capacity and willingness to pay future property taxes and homeowners insurance. A history of late payments on these specific charges is a major red flag.

The consequence of failing this assessment is rarely an outright denial. Instead, the lender will require a Life Expectancy Set-Aside (LESA). A LESA is a portion of your loan proceeds that is held back in an escrow-type account to pay your future taxes and insurance for you. While this prevents foreclosure, it can dramatically reduce the amount of cash you receive, often defeating the purpose of getting the loan.

Property Disqualifiers: When the House Is the Problem

Sometimes, you can be a perfect candidate on paper, but your home itself prevents you from qualifying. These issues go beyond basic repairs and relate to the property’s legal status or specific use.

Non-Approved Condominiums: If you live in a condominium, the entire condo project must be approved by HUD. Many condo associations have not gone through this lengthy and expensive approval process. If your project is not on the approved list, your application will be denied, even if you and your individual unit are otherwise perfect candidates.
Ineligible Property Use: The home must be used strictly as a residence. If you are running a business out of the home, such as a bed and breakfast or even using it for short-term rentals on a platform like Airbnb, it can be classified as a commercial property and disqualified.
Unresolved Property Issues: The lender will conduct a title search on your property. If this search reveals unresolved liens (other than your primary mortgage), boundary disputes, or other legal claims against the property, these issues must be cleared up before the loan can be approved.

Personal and Procedural Disqualifiers: Simple but Critical Missteps

These disqualifiers are often the easiest to avoid but are absolute deal-breakers if overlooked. They relate to your personal status and your adherence to the application process.

The Non-Borrowing Spouse Complication: This is a critical and often heartbreaking issue. If you are over 62 but your spouse is not, your spouse cannot be a co-borrower. Under rules created after 2014, they can be named an “Eligible Non-Borrowing Spouse,” which allows them to remain in the home after you die. However, the loan amount is calculated based on the younger spouse’s age, which can drastically lower the proceeds, often to a point where the loan is no longer viable.
Failure to Complete Mandatory Counseling: Before a lender can even begin a formal application, you must complete a counseling session with an independent, HUD-approved agency. The counselor’s job is to provide unbiased information about the loan’s costs and risks. At the end of the session, you receive a certificate that must be submitted with your application; without it, you are automatically disqualified.

Real-World Scenarios: How Disqualification Happens in Practice

Abstract rules become clearer when applied to real-life situations. Here are three common scenarios that illustrate how homeowners can be disqualified.

Scenario 1: The Couple with the Underage Spouse

David is 72 and his wife, Maria, is 60. They have a $120,000 mortgage balance they want to eliminate. They apply for a HECM, assuming David’s age will qualify them for a large enough loan.

Action	Consequence
The lender processes the application with Maria as an “Eligible Non-Borrowing Spouse.”	The loan amount is calculated based on Maria’s age of 60, not David’s age of 72. This drastically reduces their Principal Limit.
The final loan offer is for only $105,000.	The loan is not large enough to pay off their existing $120,000 mortgage. They are functionally disqualified unless they can bring $15,000 in cash to closing, which they cannot.

Export to Sheets

Scenario 2: The Widow with the “Minor” Home Repairs

Eleanor, 81, owns her home free and clear and wants a line of credit for future medical needs. Her home is sturdy, but she hasn’t been able to afford much upkeep in recent years.

Action	Consequence
The FHA-approved appraiser inspects the property.	The appraisal report flags a deteriorating back deck as a safety hazard and notes peeling paint on the garage door.
The lender issues a “conditional approval.”	Eleanor is disqualified from closing until she replaces the deck and repaints the garage door. The total cost of these “required repairs” is $8,000, which she must pay out-of-pocket before the loan can be finalized.

Export to Sheets

Scenario 3: The Retiree with a Tight Budget

Frank, 68, has paid off his home but lives on a fixed Social Security income. He applies for a reverse mortgage to get a cash cushion for emergencies.

Action	Consequence
The underwriter conducts the mandatory Financial Assessment.	The assessment shows that after basic living expenses, Frank has very little “residual income” left each month. The lender determines he is at high risk of being unable to pay future property taxes and insurance.
The loan is approved, but with a mandatory Life Expectancy Set-Aside (LESA).	A large portion of his loan proceeds—calculated to cover taxes and insurance for his estimated lifespan—is locked away in an account the lender controls. The amount of cash he can actually access is too small to meet his goals.

Export to Sheets

Common Mistakes to Avoid

Navigating the reverse mortgage process is complex, and simple mistakes can lead to denial or long-term regret. Here are some of the most common errors homeowners make.

Skipping the Research Before Counseling: Many people attend the mandatory counseling session unprepared. This session is your best opportunity to ask tough, unbiased questions. Go in with a list of concerns about costs, risks, and obligations.
Hiding a Younger Spouse: Some applicants are tempted to leave a spouse who is under 62 off the application entirely to get a larger loan amount. This is a catastrophic mistake. If that spouse is not formally listed as an “Eligible Non-Borrowing Spouse,” they will have no right to stay in the home after the borrower dies, and the loan will become immediately due, forcing them to move.
Underestimating Repair Costs: When an appraiser calls for “required repairs,” the costs can be surprisingly high. Do not assume you can get the loan first and then make repairs. The work must be completed and paid for before closing, which can be a major financial barrier.
Ignoring the Impact on Government Benefits: The money you receive is not considered income for Social Security or Medicare. However, for means-tested programs like Medicaid and Supplemental Security Income (SSI), any funds you take as a lump sum and don’t spend in the same month can be counted as an asset, potentially disqualifying you from benefits.
Failing to Plan for Ongoing Costs: The biggest reason for foreclosure on reverse mortgages is the failure to pay property taxes and homeowners insurance. Even with the loan, you are still the homeowner and are responsible for all property charges. Forgetting this can lead to losing your home.

Comparing Your Options: HECM vs. Other Loans

A HECM is not the only way to tap into home equity. Understanding the differences between the types of reverse mortgages and other common loans is essential.

HECM vs. Proprietary Reverse Mortgage

Feature	HECM (Home Equity Conversion Mortgage)	Proprietary Reverse Mortgage
Age Requirement	62 or older	Often 55 or older, varies by lender
Insurance	Insured by the FHA	Privately insured or not insured at all
Loan Limit	Capped by FHA limits (e.g., $1,209,750 in 2025)	Can be much higher, often for high-value homes
Counseling	Mandatory HUD-approved counseling	May not be required, but often is
Protections	Includes non-recourse feature (you never owe more than the home’s value)	May not have a non-recourse feature; terms vary widely

Reverse Mortgage vs. Home Equity Line of Credit (HELOC)

Feature	Reverse Mortgage	Home Equity Line of Credit (HELOC)
Payments	No monthly principal & interest payments required	Monthly interest-only or principal + interest payments are required
Loan Balance	Balance grows over time as interest is added	Balance decreases as you make payments
Age Requirement	62 or older for a HECM	Typically 18 or older
Income/Credit	No minimum credit score; financial assessment required	Requires good credit and sufficient income to qualify
Repayment Trigger	Loan is due when you sell, move, or pass away	Repayment begins immediately; loan term is fixed (e.g., 10-year draw, 20-year repayment)

Do’s and Don’ts for a Smoother Process

Following best practices can help you avoid scams, delays, and costly mistakes.

Do’s	Don’ts
✅ Do talk to a HUD-approved counselor early. Why: They provide unbiased, federally required education.	❌ Don’t respond to unsolicited ads or high-pressure sales tactics. Why: These are major red flags for scams.
✅ Do involve your spouse and heirs in the decision. Why: The loan will directly impact their future.	❌ Don’t sign any documents you do not fully understand. Why: This is a binding legal contract on your most valuable asset.
✅ Do get quotes from at least three different lenders. Why: Origination fees and interest rate margins can vary.	❌ Don’t agree to buy other financial products, like an annuity, to get the loan. Why: This is often illegal and a sign of a scam.
✅ Do create a detailed budget for ongoing property costs. Why: Failure to pay taxes and insurance is the #1 cause of foreclosure.	❌ Don’t leave a younger spouse off the loan documents. Why: They could be forced to move out if you pass away.
✅ Do ask the lender for a detailed breakdown of all fees. Why: Costs can be high, and you need to see the full picture.	❌ Don’t assume the FHA insurance protects you. Why: It primarily protects the lender against loss.

The Step-by-Step HECM Application and Underwriting Process

The journey from inquiry to funding is a multi-step process that typically takes about 45 days and involves several key players.

Step 1: Initial Discussion and Information Package. You will have an initial conversation with a loan officer who explains the basics. They will then send you a required information packet that includes a list of counseling agencies and a breakdown of loan costs.
Step 2: Mandatory Counseling. You must schedule and attend a counseling session with a HUD-approved agency from the list provided. This can be done over the phone or in person. After the session, you will receive a Counseling Certificate, which is valid for 180 days.
Step 3: Formal Loan Application. With your certificate in hand, you can now formally apply. You will complete the application (Form 1009) and provide financial documents like tax returns, bank statements, and proof of income. At this stage, you will also choose how you want to receive your funds (lump sum, line of credit, etc.).
Step 4: Processing and Appraisal. The lender’s processing team reviews your file and orders third-party services. The most important of these is the FHA appraisal. An appraiser will visit your home to determine its market value and inspect its physical condition to ensure it meets FHA Minimum Property Standards.
Step 5: Underwriting and the Financial Assessment. This is the most critical stage. An underwriter scrutinizes your entire file, including the appraisal and your financial documents. They conduct the mandatory Financial Assessment to evaluate your ability to pay future property charges. This is where the decision to require a LESA is made.
Step 6: Approval and Closing. If the underwriter approves your file, you are “clear to close.” You will schedule a closing appointment to sign all the final loan documents with a closing agent or attorney.
Step 7: Funding. After you sign, federal law gives you a three-day “right of rescission” to cancel the transaction without penalty. Once this period passes, the loan is funded. The lender will pay off your existing mortgage and any other required liens, and then any remaining proceeds are disbursed to you according to the payment plan you chose.

Frequently Asked Questions (FAQs)

Can I be disqualified for having a low credit score?

No. There is no minimum credit score required for a HECM. However, your credit history is reviewed during the Financial Assessment to check for a pattern of late payments on housing-related expenses like taxes and insurance.

What happens if my application is denied? Can I reapply?

Yes. A denial is often not permanent. First, get the reason for the denial in writing. If it was due to a fixable issue, like required home repairs or delinquent federal debt, you can address the problem and reapply.

How does a reverse mortgage affect my spouse if they aren’t on the loan?

It depends. If they are an “Eligible Non-Borrowing Spouse,” they can stay in the home after you die. If they are ineligible (e.g., you married after the loan closed), the loan becomes due, and they must move or repay it.

Will the proceeds affect my Social Security or Medicaid eligibility?

No for Social Security and Medicare, as the funds are considered a loan, not income. Yes, potentially, for Medicaid and SSI. Unspent funds can be counted as an asset, which could push you over the program’s strict limits.

What are all the costs involved, and are there hidden fees?

No, costs must be disclosed but are high. They include an origination fee (capped at $6,000), an initial mortgage insurance premium (2% of the home’s value), and closing costs. Ongoing costs include interest and annual insurance premiums.

What happens to my home and the loan when I die?

The loan becomes due. Your heirs can choose to repay the loan (by refinancing or with other funds) and keep the home. They can also sell the home, pay off the loan, and keep any remaining equity.

What if the loan balance is more than the house is worth when I die?

Your heirs are protected. A HECM is a “non-recourse” loan, meaning your heirs will never owe more than 95% of the home’s appraised value. FHA insurance covers any shortfall for the lender, so your heirs can walk away without debt.