Reverse Mortgage or HECM Purchase allows seniors at least 62 years of age to purchase a home using a reverse mortgage.This may also be referred to as the HP4 or HECM purchase.
(Home Equity Conversion Mortgage) HECM Purchase allows seniors at least 62 years of age to purchase a home using a reverse mortgage. This may also be referred to as the HP4 or HECM purchase.
We have a Reverse Mortgage for purchase (slide show downloads) and it explains everything from the clients, the realtors, and the financial planners view on how the HECM purchase works.
How a Reverse Mortgage Can Help You Buy a New Home. When you were younger, your home was the perfect place. Your spacious backyard, shaded by trees, provided the place for your children to run, laugh, and play. Your kitchen, along with your fully stocked fridge, continuously provided plentiful meals to feed your growing family. Your living room and den, outfitted with the television of the house, served as the family gathering spot to lure each member away from their individual rooms to cultivate family bonding time.
During those years, you may have thought that the last thing I plan to do is downsize. But as you enter retirement and your children have left the nest, you may begin to realize downsizing isn’t a bad idea.
Why Buy a New Home as a Senior? Perhaps the home that perfectly served your growing family in the past now seems too large for your current needs. Having a multiple-level home with several rooms and a huge garden may now take more work than you are willing to put in to maintain it and, if you are retired, you may prefer to downsize to a smaller, more manageable home. Or perhaps you need a home that caters to new physical needs, such as a one-level home with ramps or handrails and wider doorways. The allure of a warmer climate may be attractive, or you may simply choose to move closer to the rest of your family. Whatever your reasons, there is a viable option available to you for aging in a new home instead of your current one.
The HECM Purchase. In the early 1980’s, a new loan product called a reverse mortgage was approved to be insured by the Federal Housing Administration (FHA). This government-insured home equity loan, more specifically called a Home Equity Conversion Mortgage (HECM), was developed exclusively for seniors and signed into law in 1988. The financial tool became one of the only methods that allowed senior homeowners access to a portion of their equity without having to leave their home or add to their monthly expenses. In 2008, the loan evolved to include a new variation that allowed senior homeowners the same advantages of the traditional HECM reverse mortgage but added the option of purchasing a new home as well. This loan was called the HECM for Purchase and, with the type of financing it offers, it may be just the answer you are looking for.
How Does It Work? The HECM Purchase is a solution that allows you to accomplish two goals in just one transaction: to attain a more fitting principal residence and to obtain a reverse mortgage. This can save you money since you incur only a single set of closing costs because it consolidates two financial transactions—purchasing a home and financing it with a reverse mortgage loan—into one.
With the HECM Purchase reverse mortgage, the borrower provides a down payment using the sale of the previous home or other savings. The equity earned through the down payment and the new home’s value is then used to calculate the reverse mortgage loan amount. During this process, borrowers may need to meet the loan-to-value ratio requirements with a significant down payment and provide verification of personal income and funds. All or part of the reverse mortgage funds then cover the remaining cost of the home, just like with a traditional mortgage.
The benefit to financing with a reverse mortgage is that instead of paying the loan back every month over time like a traditional mortgage, reverse mortgage repayment is deferred to when the loan matures. This way, senior borrowers on a fixed income can finance the purchase of a new home without the burden of having to make monthly mortgage payments. Borrowers are responsible for paying property taxes, homeowner’s insurance, and for home maintenance.
Borrower Obligations. Obligations under the HECM Purchase are the same as the traditional HECM reverse mortgage. You must continue payments for property taxes, homeowner’s insurance, any homeowner’s association fees, and the cost for basic maintenance of the home, to avoid defaulting on the loan.
There are some aspects of the HECM Purchase that differ from the traditional HECM reverse mortgage. Because reverse mortgages are meant to help seniors age in place, you must move into the new home within 60 days after closing, and the new home must become your primary residence.
When is the HECM Purchase Due?
Although there is no specific date in which the HECM Purchase loan is due, a few events can cause the loan to become due and payable. The following are such events that would cause loan maturity:
The last remaining borrower or non-borrowing spouse passes away or leaves the home to live elsewhere for more than 12 consecutive months.
The home is sold.
You do not meet the borrower obligations of maintaining payment of property taxes, homeowners insurance, homeowner’s association fees, and basic home repairs or you fail to comply with other loan terms.
This can be a valuable option for seniors who need a new home that better meets their physical needs, or who wish to move closer to family members. Since this is a reverse mortgage product, monthly payments are not made on the new house.
This can be a way to get your buyer the perfect house and they have money left over. We have this down to an art, and close in under 1 month! Scott Underwood will meet with Realtors, clients, and other interested parties. My office is in Hoover / Birmingham in Eagle Point, but I still make house calls to most of Central and North Alabama with a Huntsville, Alabama office as well.
Unlike the traditional reverse mortgage, Reverse Mortgage (HECM) purchase loans require a down payment, which you must pay with your own cash. Typically, the down payment required is based on the borrower’s age. The older the borrower is, the lower the down payment requirement will be. Reverse Mortgage Purchase are subject to the same guidelines as a standard Reverse Mortgage (HECM) loan.
Realtors – show clients how to purchase and keep money in the retirement fund! – a Reverse Mortgage used to buy a home. You may think its way to hard and takes too long, but we can close just like a traditional loan in a month! Scott Underwood and Reverse Mortgage Alabama can complete these loan in a month!!
Reverse Mortgage Purchase is a highly successful program and provides a wonderful opportunity to people who are 62 years or older to move to a home more suitable for aging. Perhaps living closer to family members and services or a single level home or an active adult community will be the best choice!
The reverse mortgage (HECM) purchase option allows you to minimize your cash requirement (and keep more money in your retirement savings), get more home for your money and have no mortgage payments to make. Why take money from taxable retirement income when you can get down payment money from the reverse mortgage and not have to pay income taxes on it? Keep your money in your investments and let it continue to grow and maximize your funds.
There are additional forms needed when making an offer using a reverse mortgage as financing. Make sure you have the proper forms in your offer package. I will analyze your proposed transaction before making an offer.
Call Scott Underwood from the beginning, I will get the homeowners, the realtors on the same page and we close in the same 30 days just like a traditional mortgage. Realtors and home buyers call me, Scott Underwood 205-908-2993, 256-677-9767, or 251-333-4200 or email ReverseMortgageAlabama@gmail.com for more information or find out how to start.
I work the greater Birmingham area including from Gardendale, Trussville, Leeds, Vestavia, and anything in a 60-mile radius from my office.