August 5 | Let The Buying Begin: FHA’s New Reverse Mortgage HECM for Senior Home Purchase Program

 

 

 

 

 

By Kate Love 

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Early this year, FHA began accepting applications for its newest Reverse Mortgage Program – HECM for Senior Home Purchase.  The program allows seniors to buy a home with proceeds from a reverse mortgage for the first time.  Previously, seniors had to qualify for a conventional loan, pay for the purchase transaction and then pay again to get a reverse mortgage.  Seniors who want a reverse mortgage and need to relocate to be closer to family, or perhaps downsize, can now do so in a single transaction.

The following are answers to some of the most frequently asked questions about the program and qualification:

How much money does a buyer have to put down? 

The down payment is called the “required monetary investment”.  It is a calculation based on the youngest buyer’s age, current interest rates and the home’s value. For example, if you are 67 years old and purchasing a home worth $300,000 must make an investment of $118,032 (approximately 40% of value).  Note that an older buyer of 75 need only invest $97,427 for the same property.  

 So which part is the reverse mortgage? 

The remaining balance of the purchase price is the beginning loan balance of the reverse mortgage.  In the example above, the 67 year old buyers “invested” $118,032 so their beginning loan balance is $181,968.  Because the required investment for the 75 year old buyer is smaller, she or he will have a higher beginning loan balance of $202,573.

 Are there any required payments?

There are NO required payments of any kind, this program is designed to let seniors use a portion of their home equity without required payments. If you want to make payments (and pay down the loan balance), you may do so – but there are no penalties or required payments of any kind.

 Is it difficult to qualify for this program? 

Qualification is simple: buyers must be 62 or older and be able to make the required initial investment – that’s it.  Unlike other mortgage programs, there are no credit or income requirements to qualify.

 Doesn’t the bank take the home in a reverse mortgage? 

No, you (as buyer) always stay on title and the home remains your property.  When the home is sold or all buyers have passed away, the property will revert to the estate.  Heirs have up to 1 year to refinance the current loan balance and take title, or sell the property, pay off the loan balance and retain all remaining equity, just like a “regular” mortgage.

What happens if the loan balance becomes higher than the value of the home?

 FHA reverse mortgages are unique: if the loan balance is higher than the property value when the home is sold, the FHA insurance will pay the difference to the lender.  FHA reverse mortgages are insured by FHA and neither you nor your heirs will ever be left with any outstanding debt over and above the value of the home.

 What about the costs of a purchase reverse mortgage?

Typical costs for our example 67 year old buyer are approximately $12,400 – $6,000 of which is the upfront premium for the FHA mortgage insurance.  These costs are typically financed into the beginning loan balance.

 How can buyers find out how much home they qualify to buy? 

CALL STAY IN-HOME MORTGAGE and speak to one of our senior home loan advisors!  We are the largest independent reverse mortgage broker in the Northwest, our senior advisors are uniquely qualified to help buyers obtain rapid hassle-free purchase financing! 

Stay In Home Mortgage is currently the largest independent reverse mortgage broker in Washington , Oregon , Idaho , and is also recognized as a Top 25 Reverse Mortgage Provider in other states such as California, Arizona, Nevada, Hawaii, New Mexico, Utah, Florida, North Dakota, Minnesota, Michigan, Alaska and Colorado.

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