Reverse Mortgage (HECM) for Purchase
The reverse mortgage for purchase allows anyone over 62 to purchase a new home and have no mortgage payments. This allows older Americans to have more money for retirement. It sounds too good to be true, but it is real through HUD\HECM guidelines. In general, the reverse mortgage for purchase has the buyer make a cash payment or other, anywhere from 35 to 50%, of the sale price of the home. The buyer must use it for their principal residence until death. The heirs of the buyer have the option of paying off the loan and becoming the owners or allow the bank to sell it.
Like all things, some things are not told. How much of a down payment by the buyer depends on their age. While 62 is the youngest, the program is really geared for those 70+ since the average person lives to 80 years. If you try the program when your less than 70, you will find you have a higher percentage to pay. This is because the loan is determined by age and being younger means you live longer. Usually, the amount is anywhere between 35 - 60% of the sale price. The younger you are, the more likely you pay the higher percentage.
If your spouse is younger than 62, they must be used to calculate the loan but can be excluded from the title. The younger the spouse is, the higher your percentage is. For instance, if you are 65 but your spouse is 35, it is likely your percentage to pay upfront is between 70-80% of the sale price. This makes it hard to do, and even if you do, why not just pay for the home outright?
Other nuances of this program are as follows:
- If the appraisal identifies any repair items, the seller must pay for and complete all repairs. Seller also must pay for any final inspections associated with those repairs.
- Repairs must be paid by the seller and completed prior to closing the loan.
- Request at least 30 days to close the loan with all sellers/builders.
- You will need to be able to satisfactorily verify and source all funds needed for the down payment and closing costs by using all pages of the bank statements from the account where the funds have been kept for the past 3 months.
- There can be NO SELLER CONCESSIONS of any kind. The seller cannot credit you any money or pay your costs so negotiate the best sales price you can from the start!
- The buyers must go to HUD counseling before entering into a deal. These are online. If you have not decided on a specific home to buy, use your current home address for the certificate, otherwise, use the home you are going to buy. If you do not have the counseling certificate, you cannot get a reverse mortgage for purchase.
- You cannot buy a home in "As is" condition. All repairs must be completed by the seller.
- In most cases, you cannot use this loan on a condominium. The same applies to manufactured homes.
- A couple cannot "pre-qualify" for this type of purchase and the seller is not obligated to accept letters that are similar to this.
- A seller must have owned the home for at least 90 days.
If you need more information, call HUD resource center at 1-800-225-5342.