Reverse Mortgage for Purchase
FINANCING FACTS
The Reverse Mortgage Purchase
A solution for senior homeowners who would like to buy a home
without having to make monthly mortgage payments.
SITUATION:
You are a senior homeowner with a fixed income looking to purchase a home, and one or more of the following apply:
You would prefer not to have a monthly mortgage payment
Your income and/or credit scores prohibit you from obtaining a conventional mortgage
You intend to stay in the new home for the foreseeable future (3 or more years).
WHO QUALIFIES:
You must meet the following criteria to purchase a home using an FHA reverse mortgage:
All homeowners wishing to be on title must be at least 62 years old.
The subject property must be your primary residence.
The subject property must be one of the following: single family residence, condominium, townhouse, PUD (Planned Urban Development), or manufactured home.
You must have, at the time of closing, a cash down payment in the range of 20%-50% depending on your age.
BENEFITS:
You can now purchase a home without having to worry about your income supporting a new mortgage payment. Many homeowners have been unable to relocate, knowing that upon the sale of their current home, they will not be able to obtain a purchase loan for the new home. You can now sell your current home, cash out the remaining equity, and buy a substantially more expensive property without increasing your monthly expenses.
DETAILS:
Officially called a Home Equity Conversion Mortgage (HECM), this loan is insured by the FHA (Federal Housing Administration) and was first created in 1989. The HECM accounts for over 95% of all Reverse Mortgages closed.
This is a “non-recourse” loan, meaning that no asset will be required to be used for repayment other than the proceeds from the future sale of the home.
There are no credit score or income qualifications.
Down payment must be documented prior to closing. You cannot incur a new debt to provide the down payment.
Repayment occurs when the final homeowner on the title sells the property, permanently moves into an assisted care community, or passes away. No prepayment penalties.
Loan calculation is based on the lower of the sales price or appraised value.
Homeowners, or those they bequeath the house to, will remain on title. The home will not be taken back by the bank upon death of the homeowner(s).
Maximum home value considered for loan purposes is $625,500 (thru December 31, 2009). Anything above the limit will not be included in the loan valuation.
Rate can fixed or adjustable. The adjustable rate is based on the LIBOR index, plus a margin.
At the time of loan repayment, the outstanding loan amount and closing costs, plus accrued interest, will be paid off. The loan can be paid back by either selling the property or refinancing back to a “forward” mortgage.
