Have you considered purchasing a home using a reverse mortgage? Patrick Kerwin has been helping seniors navigate a reverse for purchase home loan for many years. His valuable experience is a benefit to seniors in Dallas, TX. Give him a call today and find out more about how he can help you facilitate this process.
Purchase Your Retirement Home
A HECM for Purchase Loan works a lot like a HECM. You must be at least 62 or older (a non-borrowing spouse may be younger) and live in the home as your primary residence. And just like a HECM, the HECM for Purchase requires no monthly mortgage payments and you don’t have to repay what you borrow until you leave the home or fail to comply with loan terms. You are, however, responsible for maintaining the home and paying all property taxes, homeowners insurance, and other applicable fees, as you would with a traditional mortgage.
To complete the purchase, you provide the down payment, using proceeds from the sale of your previous home or other savings and assets, and your lender comes in with the remaining money needed in the form of a HECM. The biggest advantage of financing your new home purchase this way is that monthly mortgage payments are optional, although you are still responsible for home maintenance and payment of your property taxes and homeowners insurance.
A HECM for Purchase offers you the flexibility of preserving more of your cash or expanding your property search criteria to homes in preferred areas or those with more of the amenities and upgrades you want.
A reverse mortgage purchase or HECM for purchase allows seniors age 62 or older to buy a new home with HECM loan proceeds. The primary benefit to the senior is that the transaction only involves one set of closing costs versus buying a home and obtaining a reverse mortgage thereafter, which would incur two complete sets of closing costs. Created by the Housing and Economic Recovery Act of 2008, this program became live on January 1, 2009. Qualified seniors must conform to all HECM requirements.
The major differences concern the property types that are eligible, the cash required at closing, the involvement of a Real Estate Agent in the loan process, the recommendation of a professional home inspection, and certain closing costs.
One- four-family dwelling unit, one unit of which the mortgagor will occupy as a primary residence
At closing, HECM borrowers must provide a monetary investment which will be applied to satisfy the difference between the HECM principal limit and the sales price for the property, plus any HECM loan related fees that are not financed or offset by other allowable FHA funding sources. In other words, the proceeds from the reverse mortgage and any funds from the sale of the old property (or from the borrower’s savings) must be enough to purchase the new property outright. The difference between
principal limit and sales price for the property also includes any HECM loan related fees that are not financed or offset by other allowable funding sources. Borrowers may provide larger investment amounts in order to retain a portion of HECM proceeds for future draws.
Lenders will be required to verify the source of all funds prior to closing. A verification of deposit, along with the most recent bank statement, may be used to verify savings and checking accounts. If there is a large increase in an account, or the account was opened recently, the lender must obtain a credible explanation of the source of those funds. Such documentation must be provided in the origination case binder. Failure to provide the necessary documentation may result in a notice of rejection and delay of endorsement.
Borrowers may not obtain a bridge loan (also known as gap financing) or engage in other interim financing methods to meet the monetary investment requirement or payment of closing costs needed to complete the purchase transaction. This restriction includes subordinate liens, personal loans, cash withdrawals from credit cards, seller financing and any other lending commitment that cannot be satisfied at closing.
Senior should consider a written agreement – you should include contingencies for the sale of the senior’s previous home, the home inspection, etc.
All seniors are strongly encouraged by HUD to get a home inspection from a licensed professional home inspector (This is suggested but not required)
Standard HECM closing costs plus:
There is no three day right of rescission, unlike the traditional HECM. The three-day right of rescission period is not applicable to HECM for Purchase transactions. Therefore, all initial advances may be disbursed on the day of closing by the settlement agent. However, FHA encourages lenders to seek their counsel’s opinion to assure compliance with Federal or State laws.
1) It is the borrower’s principal residence;
2) Construction is complete and a certificate of occupancy or its equivalent has been issued by the time the loan is insured by FHA ('endorsement') or by the lender's deadline, and
3) Any construction loan financing for the property, which will serve as the collateral for the HECM loan, is satisfied and the HECM liens will be in a first and second lien position and, at the time of closing, no other liens against the property exist.
To avoid cases of property flipping, lenders must take steps to ensure that:
If a lender suspects a senior has become a victim to a property flipping scam, the Processing and Underwriting Division of the local HOC should be contacted.
Complaints may be reported to HUD’s Inspector General Hotline at: HUD Office of Inspector General Hotline, GFI
451 7th Street, SW
Washington, DC 20410
TDD: (202) 708-2451
For more information about HECM for Purchase please contact us.