There were so many good questions that resulted from last week's article (see just a few of them at the end of last week's post) that I decided to follow up and continue the discussion.
First, on a Federal Housing Administration Home Equity Conversion Mortgage for purchase transaction, the calculations and requirements are much the same as for a regular (refinance) reverse mortgage. All borrowers must be at least 62 years of age. The proceeds from the reverse are calculated using the age of the youngest borrower; be sure to always have all the borrowers' information regardless of who is the youngest. Also include the purchase price, appraised value or FHA lending limit, whichever is less, and the current interest rates (expected rate) of the product selected.
The difference between the purchase price (or appraised value) and the reverse proceeds represents the cash needed from the borrower. This amount must come from the borrowers own funds in the form of savings or other investment accounts, proceeds from the sale of the current home, gift funds from a relative. Seller contributions and seller held seconds are not permissible.
The property being purchased must be the primary residence for the borrower(s) and they are expected to occupy the home as the primary residence within 60 days of closing. Prior to closing, the seller must complete any repairs noted by the appraiser. No repair escrows are allowed. Homeowner insurance and real estate taxes are to be kept current at all times.
Several types of properties are eligible under the HECM for purchase program. These include existing one-to-four unit properties, condominiums that are FHA approved (keep your eye out for more info on that) and manufactured homes that conform to HUD guidelines. The property must be 100% complete at the time of the reverse mortgage application.
This program has so much potential, and I hope you're speaking with your Realtor partners (builders, too) on a consistent basis. If you need help getting started with this, check out
Sue Haviland is a reverse mortgage consultant in Baltimore and the founder of Reverse Mortgage Success, a leader in the training and education for originators around the country in the rapidly growing reverse mortgage arena. Ms. Haviland has worked in the lending industry since 1981. She has been originating reverse mortgages for the last six years and still originates loans every day. She has helped hundreds of families all over the country in the last several years. Sue also shares her knowledge of this market in presentations before the Women's Council of Realtors, Mortgage Bankers Association, National Association of Professional Mortgage Women, and SRES - Senior Real Estate Specialists, Brian Sacks' Insider Seminars, as well as the public. Sue is a Certified Senior Advisor and is active in many professional organizations. Sign up for her free 7-part mini-course at
