Reverse Mortgage Requirements: Age, Equity and Texas Rules
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To get a reverse mortgage (an FHA-insured HECM), every borrower must be 62 or older, the home must be your principal residence, you need enough equity to pay off any existing mortgage from the loan, and you must complete counseling with a HUD-approved counselor. Lenders also run a financial assessment to confirm you can keep paying property taxes, insurance and upkeep. For 2026, HUD will insure HECMs on home values up to $1,249,125.
Herring Bank is a direct mortgage lender in Texas, Oklahoma and Colorado, and our reverse mortgage in Texas page covers how we help homeowners 62 and older use their equity. Below are the full requirements, what you can borrow, what it costs and the extra rules for Texas homesteads.
Considering a reverse mortgage for yourself or a parent? Talk it through with a Herring loan officer before you decide. Talk to Herring about a reverse mortgage.
Key Takeaways
- Age: All borrowers 62 or older at closing; no maximum age
- Occupancy: Principal residence, meaning you live there most of the year
- Equity: Own the home outright or have a balance small enough to pay off with loan proceeds
- Counseling: Session with a HUD-approved HECM counselor; the certificate is valid for 180 days
- Financial assessment: Credit history and residual income review; may require a set-aside for taxes and insurance
Basic Reverse Mortgage (HECM) Requirements
Almost all reverse mortgages in the U.S. are Home Equity Conversion Mortgages, insured by FHA. HUD Handbook 4000.1 and the CFPB list these requirements:
| Requirement | HUD rule |
|---|---|
| Age | All borrowers 62 or older at closing; no maximum age |
| Occupancy | Principal residence, meaning you live there most of the year |
| Equity | Own the home outright or have a balance small enough to pay off with loan proceeds |
| Counseling | Session with a HUD-approved HECM counselor; the certificate is valid for 180 days |
| Financial assessment | Credit history and residual income review; may require a set-aside for taxes and insurance |
| Federal debt | No unresolved delinquent federal debt (it can often be paid at closing) |
| Property | 1-4 unit home, FHA-approved condo or eligible manufactured home that meets FHA standards |
| Ongoing obligations | Pay property taxes, homeowners insurance, HOA dues and maintain the home |
What About a Younger Spouse?
A spouse under 62 can’t be a borrower, but HUD allows them to be listed as a non-borrowing spouse. An eligible non-borrowing spouse who lives in the home can generally stay there after the borrowing spouse dies, as long as the ongoing obligations are met. They can’t draw more money from the loan, and the amount available at closing is based on the younger spouse’s age, so it will be lower.
What Equity Do You Need?
HUD doesn’t publish a fixed equity percentage. What matters is that the amount you can borrow (the principal limit) is enough to pay off any existing mortgage and liens plus closing costs. If you owe more than that, you would need to bring cash to closing to make up the difference.
Financial Assessment and LESA Set-Asides
Since there’s no monthly mortgage payment, the main risk on a reverse mortgage is falling behind on property taxes and insurance. HUD’s financial assessment checks two things.
1. Credit History
Under the handbook, your payment history is generally acceptable if you’ve:
- made all housing and installment payments on time for the last 12 months,
- had no more than two 30-day late mortgage or installment payments in the last 24 months, and
- had no major derogatory credit on credit cards in the last 12 months (90+ days late, or three or more payments 60+ days late).
The underwriter looks at your overall pattern, and documented extenuating circumstances, like a medical emergency or a spouse’s death, can explain past problems.
2. Residual Income
After property charges, debts and living costs, you need a minimum amount left each month. HUD’s residual income table for the South region, which includes Texas and Oklahoma, is:
| Family size | South (TX, OK) | West (CO) |
|---|---|---|
| 1 | $529 | $589 |
| 2 | $886 | $998 |
| 3 | $927 | $1,031 |
| 4 or more | $1,041 | $1,160 |
What a LESA Is
If the assessment raises concerns, the lender will require a Life Expectancy Set-Aside (LESA). Part of your loan proceeds is reserved to pay property taxes and homeowners insurance over your expected lifetime. With a fully funded LESA, the lender pays those bills directly. A partially funded LESA pays part of them, and you cover the rest. HUD requires at least a fully funded LESA when credit doesn’t meet the standard and there are no extenuating circumstances. A LESA reduces the cash you can take, but it protects you from the most common reason HECMs go into default.
How Much You Can Borrow
Three numbers decide how much you get:
- Maximum claim amount (MCA). The lesser of your home’s appraised value or the HECM limit, $1,249,125 for 2026 under HUD Mortgagee Letter 2025-22. Unlike forward FHA loans, the HECM limit is the same in every county.
- Principal limit factor (PLF). A percentage from HUD’s tables based on the age of the youngest borrower or eligible non-borrowing spouse and the expected interest rate. Older borrowers and lower rates mean a higher factor.
- Principal limit. MCA x PLF. This is the total available, before paying off your existing mortgage and closing costs.
First-year limit. In the first 12 months, you can generally take the greater of 60% of the principal limit, or your mandatory obligations (mortgage payoff and closing costs) plus 10% of the principal limit. The rest becomes available after the first year.
Payout Options
- Lump sum at closing (fixed-rate HECMs)
- Line of credit you draw on as needed
- Monthly payments for a set term or for as long as you live in the home (tenure)
- A combination of the line of credit and monthly payments
Worked Example: A $350,000 Home in Amarillo
A 72-year-old widow in Amarillo owns a $350,000 home with a $60,000 mortgage balance. All figures are illustrations.
| Item | Amount |
|---|---|
| Appraised value / maximum claim amount | $350,000 |
| Illustrative principal limit factor | 0.45 |
| Principal limit | $157,500 |
| Payoff of existing mortgage | $60,000 |
| Upfront MIP (2% of $350,000) | $7,000 |
| Origination fee (2% of first $200,000 + 1% of the rest) | $5,500 |
| Other closing costs (assumed) | $3,500 |
| Mandatory obligations total | $76,000 |
| Available in first 12 months (60% of principal limit) | $94,500, so $18,500 beyond the obligations |
| Available after 12 months | About $63,000 more, for example as a line of credit |
She no longer has a monthly mortgage payment. She still pays property taxes and insurance (in Potter County, perhaps $7,000 and $3,200 a year before her over-65 homestead exemption), and as a single borrower she needs at least $529 a month in residual income under HUD’s table. If her history of paying those bills is shaky, a LESA would come out of the principal limit first.
Want to see real numbers for your home? We can walk you through the estimate before you meet with a counselor. Request a reverse mortgage consultation with Herring.
Texas Reverse Mortgage Rules (Section 50(k))
Texas writes its reverse mortgage rules directly into the state constitution. Article XVI, Section 50(k) adds these protections on top of HUD’s:
| Texas rule | What it requires |
|---|---|
| Age, 50(k)(2) | The borrower or the borrower’s spouse must be 62 or older (HECM rules still require every borrower to be 62) |
| Consent, 50(k)(1) | Each owner and each owner’s spouse must consent in writing to the lien |
| Non-recourse, 50(k)(3) | No personal liability for any owner or spouse |
| Counseling window, 50(k)(8) | Borrower and spouse must attest to counseling completed no earlier than 180 days and no later than 5 days before closing |
| 12-day notice, 50(k)(9) | The loan can’t close until the 12th day after the lender gives the state-required “Important Notice to Borrowers,” signed by you and the lender |
| When repayment is due, 50(k)(6) | Only after all borrowers die, the home is sold, all borrowers are away more than 12 consecutive months without approval, or a default on taxes, insurance, repairs or lien priority |
| Foreclosure, 50(k)(10) | Notice and a chance to cure first; a court order is required unless all borrowers have died or the home was sold or transferred |
| Missed advances, 50(k)(7) | A lender that fails to make required advances and doesn’t cure forfeits principal and interest |
Property tax deferral. The required Texas notice warns that taking a reverse mortgage may require you to give up a previously approved deferral of property taxes for older homeowners and pay taxes annually instead. If you’re deferring taxes now, factor that cost into your decision. See our guide to the Texas homestead exemption for the over-65 benefits that lower your tax bill.
Reverse mortgages in Oklahoma and Colorado follow HUD’s HECM rules without a constitutional overlay like Texas’s. The age, counseling, financial assessment and cost rules above still apply.
Costs: Mortgage Insurance, Origination and Closing Costs
| Cost | Amount | Source |
|---|---|---|
| Upfront (initial) MIP | 2% of the maximum claim amount | HUD Handbook 4000.1 |
| Annual MIP | 0.50% of the outstanding balance, accrues monthly | HUD Handbook 4000.1 |
| Origination fee | Greater of $2,500 or 2% of the first $200,000 of MCA plus 1% above that; capped at $6,000 | HUD Handbook 4000.1 |
| Third-party closing costs | Appraisal, title, recording, survey and similar; can’t exceed actual cost | HUD Handbook 4000.1 |
| Interest | Added to the balance each month | Loan terms |
Most costs can be financed from the loan, which is convenient but means the balance starts higher and grows faster. The FHA insurance is what makes the loan non-recourse: if the balance exceeds the home’s value when it’s sold, FHA covers the difference, and neither you nor your heirs owe it.
Reverse Mortgage Pros and Cons
| Pros | Cons |
|---|---|
| No monthly principal and interest payment | Upfront costs are higher than most home equity loans |
| You keep title and can stay in the home | The balance grows over time, reducing equity for heirs |
| Non-recourse: you never owe more than the home’s value | You must keep paying taxes, insurance and upkeep or face default |
| Proceeds are loan advances, not taxable income | Can affect eligibility for need-based benefits like Medicaid or SSI if funds are kept |
| A line of credit can serve as a long-term safety net | Moving out for more than 12 months, such as into long-term care, makes the loan due |
| Texas adds constitutional protections | Complex product; counseling and a 12-day wait in Texas add time |
HECM for Purchase
A HECM for Purchase lets someone 62 or older buy a new principal residence and take out a reverse mortgage in one closing. You put down the difference between the price and the HECM’s principal limit from savings or the sale of your old home, and then there’s no monthly mortgage payment on the new home.
- The home can be a 1-4 unit residence, FHA-approved condo or eligible manufactured home, new or existing.
- The MCA is the lesser of the appraised value, the HECM limit or the sales price.
- You must move in within 60 days of closing.
- If you already have a HECM on your current home, it must be paid off first.
It’s popular with retirees downsizing to be near family, for example selling a larger home in DFW to buy a smaller one in the Panhandle without a new monthly payment.
Who Isn’t a Good Candidate, and the Alternatives
A reverse mortgage usually isn’t the right fit if:
- You plan to move within a few years, since the upfront costs won’t have time to pay off.
- Leaving the home to heirs free and clear is a top priority.
- You struggle to pay property taxes and insurance now and a LESA wouldn’t cover the gap.
- You may need long-term care away from home soon.
- A family member lives with you who isn’t your spouse and couldn’t afford to repay the loan later.
Alternatives to compare:
- Home equity line of credit. Herring’s Texas home equity line of credit lists a 660 minimum score, 40% maximum DTI and up to 75% combined LTV. You make monthly payments, but costs are lower.
- Home equity loan for a one-time expense. See what a home equity loan is.
- Downsizing to a less expensive home and keeping the difference.
- Property tax relief, such as the Texas over-65 exemption and tax deferral.
- Refinancing an existing mortgage to a lower payment if your income supports it.
For background on Texas equity rules, read what home equity is in Texas and our Texas HELOC guide.
Herring Bank NMLS #415783. Equal Housing Lender. This article is general information, not legal, tax or financial advice, and not a commitment to lend. HECM rules are set by HUD and can change. Payment and payout figures are illustrations only. Consult a tax advisor about benefits eligibility. All loans are subject to counseling, financial assessment, property eligibility and underwriting.
Frequently Asked Questions
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This article is for educational purposes only and does not constitute financial, legal, or tax advice. It is not a commitment to lend. Loan programs, rates, and eligibility requirements are subject to change without notice. Consult a qualified professional before making financial decisions.
