buying a home with a reverse loan
Mortgage interest rates are so low, the lowest they have ever been having caused Americans to rush into the very competitive Real Estate market and buy homes to take advantage of the interest rates as quickly as they can locate a property to purchase.
If you are a senior, you may be considering selling a large home that has become a burden in maintenance for you or no longer suits your lifestyle, and have started to look at Listings of homes in your area before you decide if you want to stay where you are or sell your home and move.
If you decide that you are ready to make a change and maybe you are considering moving into a 55+ community, a new Tract development, or a previously owned home, you can apply for a reverse loan rather than traditional financing.
A reverse loan is easier to qualify for, you will not have to be concerned about being approved using Debt to Income ratios or FICO scores. The Title will be in your name, you will be its owner, not the Lender.
And the best news? You will not have any mortgage payments.
Becoming approved for a reverse loan is much less difficult. Generally, when a reverse loan is used to purchase a new home, the buyer will put down approximately 50% of the sales price. Obviously the funds would come from the sale of their current home.
Find out early in your “search” how much you could be pre-approved for and receive a letter from a reverse loan lender ( me), that will help you to leverage your offer and “seal the deal”.
Contact me and we can chat about it and I will provide you with information to help you work with a Realtor and answer your questions on how to get started.
Due to some recent changes in the last year, the FHA reverse loan has lost some “traction”, due to the return of the historical MIP calculation, a reduction in the amount of funds available to the borrower, and most recently a collateral review of each applicant’s appraisal.
And if there are any concerns that the first appraisal may have been inflated, a second one will be required at a cost to the borrower and no one would like being told that they might have to pay for an additional appraisal.
This latest policy change will cause the loan processing period to possibly extend out an additional two weeks, but this will be another post for a later date.
But like the Calvery coming to the rescue, Jumbo reverse loans might very well be an ideal solution for some senior homeowners as there are more options to consider then there were in the past.
Jumbo reverse loans are less expensive than the FHA option and ideal for those properties that would be considered “high value”, such as 1MM or more and for California, that could apply to many seniors who own a home which might exceed the current HUD Lending Limit of $679,650.00.
Another name for this option is a proprietary reverse loan, meaning it’s not a government program as the FHA loan is, but is offered though investors and they work exactly like the traditional reverse mortgage.
And what are the new proprietary loans like and how similar are they to the FHA reverse loan?
I will share those details in the next post very shortly.
Well, actually they “could be increasing their sales” if they understood how a senior client could use funds from a reverse loan to purchase a home.
Although the HECM for Purchase has been available for several years, it seems that most Realtors are unaware of it and or they don’t understand reverse mortgages and how they can benefit their senior clients and their own business.
Apparently, some who do know about it, are apprehensive about this mortgage financing option and because of that, they are not considering it’s use for their older clients. And that is because they are unfamiliar with the loan, the benefits and in general how it functions.
They are doing a disservice to their senior clients and themselves because they could receive two commissions. One for the Listing their client’s home and one for selling them their new property.
Generally, the client will sell their current residence and purchase another home using the funds from the sale of their home for the new purchase, typically about 50% for a down payment.
And if they are buying new construction they can apply for their reverse loan prior to the authorities issuing a Certificate of Occupancy, that can speed up the loan process rather than waiting for the Certificate to be issued and then applying for their loan.
It’s an ideal option for seniors to buy as they don’t have to qualify on Debt to Income rations or FICO scores, have no mortgage payments and own the property as the Title will record in their name or Trust.
And overall, it’s a much less stressful experience compared to applying for traditional mortgage financing and can be accomplished quicker as well, taking away much of the anxiety associated with purchasing a home.
And when they pass away, the property will go to their estate and designated heirs, not the Lender.
In conclusion, more Realtors should learn about how to increase their own sales and help their senior clients into properties that better suit their needs as they age.
Although the ability to use a Reverse loan for purchasing a property has been available for quite some time, not too many seniors know about it and neither do Realtors.
But for a senior that wants to “down-size” from a large home into something smaller and more manageable, it is an ideal option to use for the new home without having to qualify using income, credit scores and debt ratios, as are necessary on traditional financing.
The FHA HECM loan not only can be used for purchasing but the proprietary ( Not an FHA mortgage) Jumbo Reverse loan may also be used to purchase homes up to $6,000,000.00 for those seniors that are looking at more expensive properties above the HUD Lending Limit of $625,500.00.
Generally the buyer of the new property will be selling their current home and the funds from that sale will be applied to the down payment on the new purchase.
The actual Reverse loan amount that they will be entitled to receive, is calculated on the age of the youngest person and the purchase price of the new property. And that figure will be used for the new loan and the buyer would need to come in with funds ( down payment) per the difference between the sales price and the Reverse loan amount.
Using this option to purchase a property if you are a senior, is certainly much easier than going the conventional route of loan application.
Plus the escrow can close much quicker than a conventional loan.
If you want additional details about this option and or some figures, please contact me.