5 Things Every Real Estate Professional Should Know about Reverse Mortgage for Purchase

Oct. 28, 2014

5 Things Every Real Estate Professional Should Know about Reverse Mortgage for Purchase Did you know a reverse mortgage can be used to purchase a home – even if the buyer has never owned a home before? That’s right. As reverse mortgages have undergone major changes in the past couple of years, their use has reached from helping struggling seniors, to boosting funds of already affluent retirees, to assisting home buyers live out their retirement in their dream home with NO mortgage payment. Here are five very important things every real estate professional should know:

The Reverse Mortgage for Purchase (HECM for Purchase) Program is available to seniors and married couples 62 and over, regardless of income or credit. When applicable, both spouses can be on the loan, but they must both be 62+. Others simply residing in the home are not required to meet this criterion.

The loan can be used to purchase single family homes, town homes, and FHA approved condos. In order to purchase a new construction home, the home must have a “Certificate of Occupancy” issued prior to starting the application process. This home must be the buyer’s primary residence.

Instead of using the equity from an already existing home they own as is the case with a traditional reverse mortgage, the buyer will contribute a down payment towards the cost of the new home and the reverse mortgage lender will make up the remainder of the cost – leaving the borrower with NO mortgage payment. The amount of the down payment is calculated a couple different ways and changes based on the age of the homeowner and the value of the home.

Reverse Mortgage for Purchase loans are FHA insured, but the homeowner will always own the home, just like with a conventional mortgage.

Unlike a traditional mortgage where the loan reaches a “maturity date”, reverse mortgages have a “maturity event”. This is the event which causes the loan to become due and payable. These “events” include: the last remaining borrower passes away, the homeowner sells the home, the last remaining borrower leaves the home for 12 consecutive months, or the homeowner defaults on property taxes or insurance.

Questions? Don’t hesitate to contact me!

Article written by Jan Jordan

Reverse Mortgage — Security One Lending

Office — 970-646-8908 or 303-993-7658