Reverse Mortgage Home Purchase Q&A – Ask ARLO™

Hello John,

The HECM loan does not allow for higher amounts to include additional repairs or improvements.  The loan is based on the lower of the appraised value, the purchase price, or the HUD lending limit.

Hi Julie,

No there is not.  In fact, you can even use the reverse mortgage to but the house.

Hello Claudia,

The appraiser’s inspection is not as detailed as a home inspector's, and I always recommend a home inspection and a home warranty.  A good home inspector should check every outlet to ensure all electrical systems are in working order, check all plumbing for leaks, and cover much more detail than an appraiser would on all appliances and working systems.  Furthermore, a warranty will cover any needed repairs that even the inspection cannot uncover at the time of purchase.  

No, but you can use it for the purchase of the new home if you wish.  You can use as much or as little of the mortgage amount available on the new home and if you so choose, you can repay the loan at any time without penalty.   

Hello Carla,

When you use a reverse mortgage to purchase a home, a detached property or a condominium, you would bring in your portion of the down payment and the reverse mortgage would supply the rest. 

The older you are above 62 years of age; the larger percentage of that purchase price will be supplied by the reverse mortgage as the loan benefit is age driven.  To find out what your benefits will be, please feel free to visit our online purchase calculator. 

With a very small amount of information, the calculator can give you a very accurate idea of the funds you will need to purchase your property and what the reverse mortgage will cover. 

The fees are accurate based on the area of the country in which the property is located but you have to remember that we do not choose the third party service providers on a purchase (title, closing, etc.), you and the seller do. 

For that reason, the fees may not be exactly what you end up paying for these costs on a purchase transaction if your provider has different fees, but the costs should still be very similar overall.

Hello Janice,

You sure can.  We have written several times about purchasing with a reverse mortgage, and if you plan on getting a reverse mortgage after you buy a new home anyway, it’s a very smart way to go, as you cut down on costs due to the fact that you don’t have a second transaction and duplicate costs.  Please feel free to visit our purchase calculator to see what you can expect from a reverse mortgage purchase in the area where you want to buy.

Hello Craig,

You don’t have to wait. In fact, you can even use a reverse mortgage to purchase.  If you can purchase with the reverse mortgage rather than purchasing and then refinancing later, you can eliminate some of the double expenses associated with two transactions.  Any time you obtain a new reverse mortgage, though (to refinance a property you already own or to purchase a new one), there will be a substantial equity position required in the home.  Whether that equity position is the result of years of appreciation or a large initial down payment, because you never have to make a payment and your balance rises over time, you never start your loan with 100% loan-to-value or close to it.

I would encourage you to visit our website to see for yourself what that requirement would be in your circumstances.  Our reverse mortgage purchase calculator does not require you to enter personal information, such as your Social Security number, but it will provide real-time information based on your age and the closing costs associated with the zip code of the area where you want to buy.  Different states and sometimes even counties have varying closing costs, and the calculator will give you accurate costs for the area you have chosen to purchase in.  At least this way, you will know, with no hassle or obligation, whether a reverse mortgage purchase is right for you.

Hello Hydrick,

Let me repeat what I think you told me and answer accordingly.  If I misunderstood the question though, you may have to correct me.  I think you told me that you have been buying a property on a lease or rent-to-own arrangement for 3 years and are wondering if, even with bad credit, you can use a reverse mortgage to purchase the property.  Is this correct? 

If I have your question correct, this loan would not meet HUD requirements for a reverse mortgage purchase.  While HUD will insure a loan under specific circumstances including lease option terms, it is not permitted on the reverse mortgage program.  You would have to exercise your option and purchase the home and then later, apply for the reverse mortgage on a property you already own (typically 12 months later). 

Your ability to obtain that refinance at that time would include a financial and credit assessment so your characterization of your credit as “bad” may or may not prevent you from obtaining the reverse mortgage at that time – it would be impossible to know that from the information given especially not knowing what future credit and income would be like.

Hi Marcia,

You don’t even have to wait for the first home to sell.  Please feel free to visit our site and use our HECM purchase calculator to see what you could expect at this time.  If you have an idea of what your home will sell for, you should know how much money you will walk away with, which will let you know what you can expect and how much home you can buy with the next reverse mortgage.  If that works for you, you can even set it up so the sale happens almost immediately (within a day) of the payoff of your old home.

HUD will not allow borrowers to use borrowed funds to close a reverse mortgage purchase transaction.  The funds must be the borrower’s funds and must be able to be tracked, whether that is from being in an account of the borrower or from the sale of an asset owned by the borrower prior to the purchase.  HUD will not allow borrowers to borrow against their current property in order to purchase the next home with a reverse mortgage.

Hi Mindy,

All you have to do is close the loan and then once the other home sells and you have the additional funds available, go onto our website at https://reverse.mortgage/purchase-calculator and you can see exactly what will be available to you on our calculator.  You don’t have to wait 6 months, you can begin whenever you are ready. 

After you visit the website, you can choose to either begin the process or wait, entirely your call.  If you choose to proceed though, you will already know your costs and will already have received a proposal.  You would have to contact a counselor of your choice for the HUD-required counseling and once that is completed, we can begin the process of starting your reverse mortgage (there may be a waiting period depending on the state in which you live but we will certainly let you know if the local laws require one).

It’s just that easy.  Everything is in your hands and you decide how quickly you want to proceed.  Once the loan is closed, you will still be responsible for your taxes and insurance along with any special assessments (HOA dues, etc) and reasonable maintenance but you will not have to pay a mortgage payment on the home for as long as you live in the property.

Hello Grace,

Very possibly.  It all depends on your residual income.  If you don’t have a lot of other debts to pay and the home is not a large one with high property taxes, you may very well meet the residual income requirement, but the only way to know for sure would be to use our online H4P calculator or speak with one of our associates at 800-565-1722. 

We would be happy to go over the numbers with you in advance, and there are also ways to enhance residual income, such as dissipating assets if you have cash in the bank.  Asset dissipation is just a calculation HUD allows, where we assign a monthly income amount to cash assets based on the asset amount and the borrower's age, in accordance with the schedule HUD has predetermined.  It assumes that you could take out equal payments of your cash for life and allows you that much more “income” in your qualification, even if you never had to draw a dime just because you could.

Hello Anna,

She absolutely can.  In fact, many reverse mortgage borrowers do sell the home on which they have a reverse mortgage and then use a reverse mortgage to purchase their next home.  It allows them to buy without having to come into the closing with as much money down and still not have to make mortgage payments on the new home.

If they use the reverse mortgage to purchase, it also eliminates a second set of closing costs by not requiring the borrower to go through two separate closings, first the purchase, and then a refinance.  There would be just the closing on the purchase that they go through anyway.

Hello Al,

The amount you have to put down on a reverse mortgage purchase depends on a number of things including your age, the age of your spouse (if any), the interest rates in effect at the time, the price of the home or the appraised value (which you did give us) and the local closing costs from the service providers you and the seller choose which we derive from the property’s zip code.  We can estimate the costs, but cannot provide accurate numbers without a little more information.

However, we have made it really easy for borrowers to get this information now, without having to provide a lot of personal information or face much hassle or obligation.  Now you can simply visit our HECM Purchase Calculator, put in just a little information (you don’t even need your actual birthdate; just a month and year of birth will do the job), and we can give you a real-time quote with accurate expenses for the area in which you wish to purchase.  Take just a few minutes to visit us online, and we will be happy to show you all the numbers you need in real time to help you make the decision that’s right for you.

Hi Deanna,

HUD made cutbacks to the program that took effect in October of 2017, but the amount varies based on borrowers’ ages, property values/lending limits, and interest rates.  Even then, costs vary by location, which will affect the amount of money needed to close.  The best thing you can do is visit our website and see how the numbers work out for your circumstances based on where the property is you would like to buy. 

The calculator is free to use; there is no obligation, and you do not have to provide any real personal information (other than the month and year of your birth to determine benefits).  Visit our HECM Purchase calculator and see how the purchase reverse mortgage would work for your circumstances.

Hi Martin,

The reverse mortgage is not a 100% loan and, in fact, requires a large down payment.  I would suggest you look at our online HECM for purchase calculator to see what you might expect if a reverse mortgage is right for you, given your requirements.

Hi Michael,

The HUD reverse mortgage purchase can be used on HUD-approved properties, including 1-4 family homes, as long as the borrower is living in one of the units as their primary residence.

Hi Carol,

I don’t have all the particulars on the property, your age and any of the information about your qualifications but assuming you and the property meet all HUD requirements at the time you apply for the reverse mortgage, there should be no reason why you would not be able to do what you propose based on those numbers.

Hi Julie,

So glad you asked this question, as I believe many people wonder about the same issue.  The reverse mortgage allows borrowers to receive a benefit or loan amount based on their age, property value, interest rates and the HUD lending limit. This money can be used to pay off existing loans, as a line of credit to be drawn as the borrower desires, for monthly payments paid to the borrower, a combination of these options or to purchase a home.  If you use the entire amount available to you to purchase a property, there are no funds left in the loan to make payments to the borrower.

Some borrowers have chosen the adjustable-rate line-of-credit option to receive funds on a purchase reverse, which allows them to take less than the full reverse mortgage available (the fixed rate requires a full draw at closing).  This does allow borrowers to use the remaining funds for payments or as a line they can access as needed, but it means they have to come into closing with more money, so most borrowers don't choose this option.

In the last such case where the borrower did make this choice, the borrower felt that the lower interest accrued on the lower balance of the initial credit line and the growth of the funds, making more money available later, would be more advantageous than having the money in the bank.   However, most borrowers use the entire loan to purchase the property, leaving no money for monthly payments or a line of credit. 

Hi Constance,

You sure can. Please visit my reverse for purchase calculator and receive a real time, no hassle, no obligation proposal to see what you can qualify for in the area of your choice. 

Hi Sandra,

If you are short on funds to close the loan, you have only a couple of options.  HUD will not allow you to borrow money to close the loan, so you have the option of refusing the loan or obtaining a gift from a family member for the amount needed.  The donor giving you the gift would have to be able to verify that they have the funds to give you, sign a gift letter stating that they are giving you the funds and that they do not have to be repaid, and have the funds verified as received from the donor.  While there can be no repayment required of the gift, the donor can be a recipient of the borrower’s estate or portions thereof, so in essence there are ways that families do take care of one another.

The only other option, besides not taking the loan and looking for other ways to get by in your current circumstances, is to consider downsizing if there are other properties available that are less expensive than yours.  I know most of us don’t want to sell our homes, but now might be a perfect time to “right size” your home or find one that better suits your needs.  You can use a reverse mortgage to buy a home or refinance your current home.  If you can find a smaller or better suited home that is less expensive and with fewer costs, perhaps one with no stairs, is closer to your family, has a smaller yard to care for or no pool that is now too much for you to maintain, or for any number of other reasons, then it might actually benefit you to consider that option at this point. 

Hi Jo,

FHA Reverse mortgages use a residual income method to qualify borrowers – not a ratio method.  If your credit is good, the financial assessment will look at your monthly income and work backward to determine your eligibility as long as, after all your debts are paid, you have sufficient residual income on a monthly basis.  So let’s look at what you have given me.  $44,000 per year is $3,667 per month on its own.  The property tax of $9,000 is $750 per month, bringing you down to $2,917 per month.  Insurance of $800 per month is $67.00 per month, which takes you down to $2850.00.  $4,000 HOA Dues are $333.00 per month, or now you are down to $2517.00 per month.  HUD uses a utility factor of $.14 (fourteen cents) per square foot, so if your new home is 25oo square feet, that amount for utilities will be $350.00 per month, bringing you down to $2,167 per month residual income left over after all your housing costs are paid.

Now, if you have any other debts that you pay monthly (car payments or credit cards, etc.), those amounts would also have to be subtracted from the $2,167 you have left so far.  HUD has different residual income requirements in different parts of the country (it’s more expensive to live in CA or NY than in FL or TX), but as long as a single person has at least $590.00 per month residual income after all debts are paid, it’s a little under $1,000 per month for a family of two.   If you only have the obligations you listed above, then you will qualify quite nicely, and you don’t even need that royalty income to qualify.

Please feel free to visit our free H4P calculator, and I will be happy to show you just what you can qualify for.  It’s quick and easy, and we close many reverse mortgage purchases every month.

Hello Jack,

We would have to get explanations on the short sales and document the issues, but with explanations that demonstrate that the circumstances were beyond your control, I am confident that you would still be able to be approved with good credit now and a 24-month history of on-time payments of taxes and insurance in your current home.  With regard to the amount, that would depend on the price of the home you choose, the rates in effect at the time, the area of the country in which you are purchasing, and secondary market conditions for program costs.

You do not have to identify the specific property you intend to buy in order to be prequalified for a reverse mortgage purchase.  We can gather your income and asset documentation, run your credit with your authorization, check your name and all known information against the HUD GSA LDP Lists for eligibility, and run all the HUD financial assessment calculations and issue you a prequalification letter stating that you have been prequalified for a specific amount.  The letter will have to contain language stating that rates, properties, terms of sale, and even other parties to the transaction may affect approval, but that is true with all loans once the lender’s underwriter has an opportunity to review the transaction and all factors are known.   Then you can go out and find a home, knowing in advance what amount you will qualify for and how much money you will be required to put down on the purchase. 

Hi Pat,

You can use as many reverse mortgages as you wish; the only caveats are that you can’t have defaulted on the previous loan and you can only have one reverse mortgage at a time.  We have closed several reverse mortgage purchase loans for borrowers who had their 2nd or 3rd reverse mortgage after successfully closing previous reverse mortgages.

The one thing I will caution you about is that it sometimes takes a day between closing one loan and HUD clearing you in their system before you can close the next loan.  After making this discovery during the first concurrent closing we attempted, we have since advised borrowers to ensure there is at least 24 hours between the closing of their existing property and the anticipated close of the new purchase, and there has not been an issue since.

Hi Mark,

That amount will depend on where you are located (different parts of the country have different fees and costs) and the interest rates in effect at the time, because those are the other factors that will determine how much you would get in the loan.  I would recommend following me over to our no-obligation purchase calculator. With just a little more information (nothing personal), I can give you a down payment number that takes all factors into account and is a real-time, accurate figure.  

Hi Neil,

I think I may be missing the gist of the question, but anyone over 62 who qualifies can get a reverse mortgage.  Is there something I am not reading into the question?  When you say they want to move out of their house, are they selling it or renting it?  If they sell it, that would be no problem.  If they intend to rent it with no rental experience and no rental history on the home, they would have to qualify for the reverse mortgage with the costs of the existing home as well (but again, if that home is sold, it is not an issue).

If they are building a home, they must complete the build and move into the property before they can take out a reverse mortgage – reverse mortgages cannot be used for construction.  The property must meet HUD requirements.  The only tricky part you have with a borrower building and then seeking a reverse mortgage rather than buying an existing property is that the expenses are already made before you are assured of the borrower and property meeting HUD requirements.  If they go down and build, and in the time required to build, circumstances change with their income stream, property values, interest rates, or even something external to the property that affects the qualification, if they are counting on the reverse mortgage to retire construction loans or replenish needed cash once done, you run the risk of changing circumstances that might make the loan unattainable.

Hi Maria,

This is not a reverse mortgage question but rather a legal question that you should ask of a licensed attorney in the area where the property is located.  I’m sorry, we are not licensed to give legal advice and are certainly not the proper place to go to request information about notary laws and whether or not a good faith error changes anything with regard to your obligations or rights.  For your own protection, I would suggest you contact the proper individual (the licensed attorney).

Yes, you can as long as you are both over the age of 62 and both occupy the home as your primary residence.

Hi Juanita,

Whether you choose to take the second payment available to you or not would probably depend on whether you still occupy the home and if you want to draw the money at that time.  If you are still living in the home, it is entirely your choice as to whether or not you wish to draw additional funds that are available to you.

There is never a pre-payment penalty on a reverse mortgage so if you have determined that your circumstances have changed and you now wish to sell the home and move, you can do so at any time without a prepayment penalty.  You only pay off what you borrowed and the interest that accrued on that amount, so if you think you will be paying the loan off soon, you may want to hold off borrowing any more of the line of credit to keep your interest accrual down.  By the way, you can also use another reverse mortgage to buy a home in South Carolina if that is your goal once the first reverse mortgage is paid in full.

Hi Steve,

The reverse Mortgage does not have a build to perm option.   The improvements must be already completed and the certificate of occupancy must have already been issued before we can even start the loan in accordance with HUD rules. 

I also need to give you a heads up for properties with acreage and outbuildings.  HUD intends to insure properties used for residential purposes and does not get particularly excited with unique properties, large parcels and out buildings.  In fact, for the appraiser to even give outbuildings any value, he must also find sales comparables with and without the buildings to adjust to give them additional value.  Also, the sale comps should be the same or similar size to support the appraiser's final opinion of value.  If the improvements you describe with a home are typical for the area with plenty of sales to support the value, there should not be any problem.  However, if the other properties in the area are not similar, it could be a difficult home on which to place a reverse mortgage and you would want to keep this in mind if your sole plan for financing later is a reverse mortgage and the failure to execute that plan would cause real problems.

Hello Diane,

The reverse mortgage will not finance 100% of the purchase price.  If you get a great deal on the price of the home, that's great but then you won't be able to turn around and do a reverse mortgage for 100% of the purchase price and have no money into the property, HUD just won't allow it.  For the first 12 months, the "official" rule is that the loan will be based on the sales price or the appraised value.  If there is a small amount of increase due to bona fide improvements or it's not quite 12 months and the appreciation is verifiable, you can usually get a little slack there but you can't finance the entire purchase price, especially right after you buy the home.

If you apply for the loan 12 months or more after you buy the property, the purchase price is irrelevant.  If you are getting that great of a deal, you just need to hand in there for the first 12 months and look to do the reverse mortgage sometime after that.

Hi Dirk,

The reverse mortgage cannot be used like an FHA 203K "Rehab" type loan.  In fact, if a property is in the process of construction or major rehabilitation, HUD will not even allow us to take a loan application until after the certificate of occupancy has been filed for the completion of the work - and then we can start the process.   

Hi Richard,

You are precisely correct, and this is why we do not currently see the HECM for purchase used much for these transactions.  Builders will often allow them on standing inventory they have not been able to sell otherwise, but do not want to wait for the loan to start only after the certificate has been filed, especially knowing that there could still be issues with the loan approval (appraised value, etc) at that time.  However, our industry has approached HUD about this issue and pointed out the problem, including the fact that HUD does not make the same requirement of their forward borrowers, and there has been some whispering of possible changes.  I can't make any promises, and we are bound by the current restrictions, but the issue has been brought to light, and there is hope.

Also See: https://reverse.mortgage/new-construction-purchase

The purchase reverse mortgage works exactly the same with regard to the amount of money you receive under the program as does the refinance program with the only difference being that you have access to all the funds at one time to use to buy the home.  That being said, the younger you are (but still 62 or over), the longer you could keep the loan and accrue interest without making a mortgage payment.  So yes, older borrowers do receive a higher loan to value benefit than do the borrowers at the younger end of the eligible spectrum. 

To determine your eligibility under the program, you can visit our online calculator or request a no-hassle no-obligation quote from our purchase calculator here.

Hi Jerry,

The reverse mortgage is not a 0% down loan and does require quite a hefty down payment, anywhere from 50% to 35% depending on the borrowers' age(s) and the closing costs in the area.  The reverse mortgage allows borrowers to stay in the home for the rest of their lives without having to make a mortgage payment and so the interest accrues on the loan and the loan balance grows,  The loan would not work if it started at 100% of the balance.

Since the only loan programs we offer her are reverse mortgages, I really don't have a suggestion for you.  Since he is an army Veteran, I would suggest that you check with the lenders offering VA loans to see what programs they have that might work for your brother and please thank him for him for his service to our country! 

At anytime you would like an estimate of the required down payment you can use our reverse mortgage purchase calculator found here.

As long as you meet the HUD requirements and have the down payment, yes. We have borrowers who qualify on just Social Security income now.  

There is no secret formula and we can determine eligibility very quickly.  Call or email us if you are considering buying and we can run the numbers for you and send you a written proposal.

Hi Ana,

As long as the first reverse mortgage is closed satisfactorily, yes, you can use the reverse mortgage over and over again,  You can only have one at a time but there is no limit to the number of reverse mortgages you can obtain over-all as long as you meet the requirements and live in the home.  HUD did implement the financial assessment (FA) guidelines in which all applicants must meet the income and credit requirements now.  If you think you have any issues that may prevent you from being approved under the FA requirements, please don't hesitate to contact us an we will be happy to review your circumstances with you.

Hi Jack,

There is no requirement on the reverse mortgage program that you sell your existing home.  There are some issues that you may run into if you do not plan to sell the existing home, but most can be overcome with planning.

Firstly, if your current home has a reverse mortgage on it, you cannot have two reverse mortgages at the same time.  This is one of the toughest issues to overcome as the first reverse mortgage does have to be satisfactorily closed before you can close on the new sale.  If you do not have a reverse mortgage on your existing home, this is a moot point.

You must be able to qualify with both houses if you have not sold your existing home.  Even before HUD enacted Financial Assessment Guidelines in 2014, they required borrowers using the reverse mortgage for purchase program to meet qualification criteria.  If you retain a home, you must be able to qualify with both homes and that means you also have to have the down payment requirement for the new home without the sale of the existing available to you, the funds cannot be borrowed.

You must occupy the new property as your primary residence.  All of underwriting is based on history and likelihood of continuance.  Since you are not selling the existing home, the underwriter has to look at the transaction and the totality of the circumstances and make sure they all make sense.  If there is any question that the home you are purchasing will be your primary residence, there may be additional requirements before the loan can close and there are always occupancy inspections on purchase reverse mortgages after the closing to ensure borrowers have moved into the property.

So if you qualify with both homes and do intend to occupy the property as your primary residence as soon as the sale closes, there should be no issues with closing a reverse mortgage purchase, even if you want to retain your existing home and sell it later, rent it out or let family live in it!

Hello Bonny,

Your situation is not uncommon, as many homeowners who took reverse mortgages later in life decide that they need a lower-maintenance or single-level home to age in place. You are welcome to sell your home at any time without penalty and use a new reverse mortgage to purchase another property.

We can do this concurrently. You would first make sure you're qualified for the new reverse mortgage purchase program by completing our online intake on the top-right side of our website, where it says “apply today”.

We would then run your credit and check to ensure you meet the program's minimum residual income requirements.

You can then list your home and accept offers only contingent on you finding a new home. Or you can sell your house and accept only offers that would allow you to lease back while you are on the hunt for your new home.

The new reverse mortgage for home purchase would require you to make a down payment anywhere from 40-60% down, depending on your age, and the down payment requirements can be met from the proceeds of your existing home sale, or a combination of those proceeds and your own assets. 

The purchase calculator shows the amount you would need to bring in to complete the transaction and your initial loan balance.  There are additional fees; the calculator results include everything we are aware of.

But now, having said this, there are a couple of things you need to know.  Firstly, you and the seller choose the service providers for the purchase, so we don't know the exact charges and can only estimate them.  We don't have any built-in charges for inspections or home warranties you may or may not want to order.  And finally, the calculator does not add one year of insurance you will be required to obtain because this cost can vary greatly depending on where the property is located, which insurer you choose, and the level of insurance you carry.

Your best bet is to request a free, no-obligation proposal for your circumstances.  It may be right in line with the one you already received or it may be a little different based on the factors I list above, but it would give you a detailed listing of the costs (as best we know them) and the total amount you would need to close the loan.

Hi Todd,

The amount of the benefit you receive on the purchase is based on the purchase price or the HUD lending limit, whichever is less.  The HUD lending limit is currently at $625,500 so the amount of the loan you receive will be based on this amount and your total benefit would then depend on the age of the youngest borrower to be on the loan. 

To out this into perspective, a 62 year old borrower would receive a Principal Limit or benefit amount of $327,762.00 toward the purchase of the home.  Fees and closing costs vary around the country but this could leave you with anywhere from about $491,000 (with no lender origination fee and minimal state costs as in a location such as CA) to as much as $513,700 that you have to bring in to close the purchase in a state like Florida with high state costs and a lender origination fee of $6,000 (which is another reason why it really pays to shop around).  The money that you don't have to use for the purchase would absolutely be yours to do with as you please and the equity in the home is absolutely yours, but you would not be able to draw more of that equity out of the home with the reverse mortgage as that avenue would already be maxed out for your availability.  The reverse mortgage does not prohibit any secondary financing, but most institutional lenders are not willing to lend behind the loan with no payments required. 

Please request your purchase quote here: https://reverse.mortgage/purchase-calculator

Hi Jackie,

I can read this question one of two ways, 1) "Can I use a reverse mortgage (on my existing my home) to purchase a second home" or 2) "Can I use a reverse purchase mortgage on the purchase of a second home".  The first one would be a yes, you can use the proceeds of the reverse mortgage you take out on your primary home to purchase a second home as long as that home remains your primary residence.  The answer to the second way the question can be read would be that unfortunately, there are no programs available at this time that will do a reverse mortgage on the second home itself.

So the answer depends on how you meant the question.

Hello Barbara,

We have moved many of our customers across state lines using the reverse mortgage for home purchase and would typically start by issuing you a preapproval after completing our online request you can find here https://reverse.mortgage/apply/

Just make sure that when you are selecting the program that you are applying for to use the drop-down option “for a new home purchase”

We will then run your credit and check your minimum residual income requirements and if all is good we will issue you a preapproval letter which you may present with any offers you wright.

We are licensed in both Colorado,  Arizona & many other states. We are experts in dealing with all aspects of the reverse mortgage for home purchase so if you would like to put us in touch with your buyer’s agent we would be happy to discuss both your eligibility and specifics we are looking for in the purchase contract.

We will also return you a written quote which will illustrate the required down payment and all interest rate and closing costs associated with your reverse mortgage purchase loan.

Thank you kindly and we look forward to working with you!

Hello Tom,

If you are using a reverse mortgage to purchase a new home it is a requirement that you take occupancy within 60 days of the closing.

Per HUD “HECM mortgagors must occupy the property within 60 days from the date of closing. Lenders are required to ensure all outstanding or unpaid obligations incurred by the prospective mortgagor, in connection with the HECM transaction, are satisfied at closing.”

Source: https://portal.hud.gov/hudportal/documents/huddoc?id=08-33ml.pdf

Hi David.

The benefit amount on the purchase will be determined on the purchase price or appraised value, whichever is less, just as is the case on a forward or traditional loan.  Therefore, if the purchase price is $124,500 and the property appraises for this amount or more, everything, including the amount you bring in for down payment, will be based on this number.  I don't know all your closing costs and some areas of the country are more expensive than others, but I would estimate the amount you need for closing closer to $68,000 - $71,000 or thereabout state and local fees. 

Also, you can use a reverse mortgage to purchase the home or use it to refinance the property after you move in.  If you wait for 12 months and then apply, the lender does not have to consider the purchase price and would use just the current appraised value whereas any time in the first 12 months would necessitate them using the purchase price or current appraised value, whichever was less in most instances

Hi JW,

At this point, the answer would be yes but I would tell you that you should continue to keep up to date on current program parameters since a lot can happen in 4 years.  Interest rates and HUD changes may change that answer, but for now, the answer is yes you can.

Hi Patrick,

If you are building a home, there are a couple of considerations the lender must take into account under HUD guidelines. Firstly, the lender cannot take an application until the completion certificate has been filed with the county where the property is located. The property must be appraised by an FHA-approved appraiser, and the amount will be determined based on the cost to build the home plus the land acquisition cost or the appraised value, whichever is less, for the first 12 months after completion. After that time, it would just be the appraised value.

As for the loan process, you must complete the required reverse mortgage counseling before the loan can be processed, assuming the time frames above. Reverse mortgages are like most other loans; if there are no appraisal, title, or credit issues that the lender has to contend with, the loan can be completed, and you can receive your money in about 35 to 40 days. If, however, third-party service providers such as appraisers are extremely busy, or if you're located in an area where they're hard to find, the appraisal process can take longer. If there is any kind of cloud on title, it can take even longer. The appraiser may also indicate that work needs to be completed on the property. If that happens it also depends on how long it takes you to complete the required work.

I would love to tell you that all loans are done in "XX" amount of time, but unfortunately there are just so many things that are out of our hands. If the appraiser determines that work needs to be completed on the property before he can issue a clear report, it can sometimes take weeks. Old liens can sometimes create challenges if lenders or individuals are no longer available to remove them. We can complete everything required of us on the loan fairly quickly, but we are dependent on all of the other pieces, and in some parts of the country some of the other services take longer than in others.

Also See: https://reverse.mortgage/new-construction-purchase

Hi Bill,

If you paid off the loan and there was no loss to the lender (and HUD), then you are eligible for another reverse mortgage, and you're in luck: you would not have to use the entire $100,000 on a $150,000 purchase price! Use our hecm for purchase calculator to estimate your required down payment. 

Hi Carolyn,

The reverse mortgage for purchase is just like other FHA loans for purchase transactions.  Just as on a refinance, you have the benefit of a mortgage amount based on your age and property value; the loan brings that much money to the closing table, and you bring in the balance to complete the transaction.  You can determine the amount for which you will qualify in advance and would know how much you will need for closing long before you ever make an offer on a home.

There are a few things you really need to watch in the reverse mortgage purchase program that are a bit different, and we outline them in our reverse mortgage purchase information on our website here.  There are a few things you need to remember that are different and relate to condominiums, manufactured homes, new construction, payment of fees, and included personal property.  If you review this information in advance and keep it in mind as you progress through your purchase transaction, a reverse mortgage purchase is most often every bit as smooth as with any other loan!

Hi Phyllis,

HUD requires borrowers to use the appraised value or the purchase price, whichever is less, for all homes purchased less than one year ago.  After one year, the lender would use just the current appraised value.

Hi Madeline,

The loan actually closes pretty quickly.  If you did a reverse mortgage purchase on a short sale that took that long, it was probably due to issues with the approvals required from the selling lender that delayed things.

If you have a purchase that is not working with a short pay, or a foreclosure property, you can look at the All Reverse FAQs here, or read about the program and what HUD will and will not allow on the HUD Website at this link.  Either way, knowing what the loan is all about and what HUD will and will not allow BEFORE you make an offer will save you a lot of grief.

The purchase reverse mortgage is an FHA-insured loan.  That means that you have to follow the HUD protocol for eligibility and appraisal.  While the transaction does not take an exorbitant amount of time, don't plan on it closing in 5 days either!  The property and appraisal must meet the HUD requirements listed on the HUD website. Failure to do so does not mean the house is not a great house, but it could mean it's not eligible for FHA/HUD-insured financing. 

The biggest thing I tell folks is to know the issues that can be the biggest stumbling blocks, and if you have those covered, you're probably going to have a positive experience.  If you remember to follow the FAQs and ask questions in advance, there are typically no problems.  Not all properties are acceptable to HUD.  It doesn't make the house a bad house, but it might not be an FHA-insurable property, so it's best to find out as much as you can in advance. 

On the purchase program, you don't "draw" from the reverse mortgage over time, you take a lump sum distribution to purchase the home and then you put down the remaining amount as your down payment.  Not knowing where you are located and with all areas having different closing costs for state and local title and other services, I can't tell you exactly what the costs would be but I can get you in the ball park. 

You would need to put down about $55,000 - $57,000 depending on state fees for a purchase price of $120,000 and the reverse mortgage would put down the rest.  You would not have any funds available to draw from, but you would also have no mortgage payment for as long as you lived in the home and you would not have to use all of your $85,000.  If you need to know the numbers on any specific scenario, you can visit our website or contact us and we would be more than happy to let you know what you would need for down payment, etc.

Hi Tracie,

This is absolutely acceptable.  The property type meets HUD's guidelines and the property would have to as well but you are both over the minimum age of 62 so this would meet their parameters.  Let us know if we can help you!

Hi Marsha,

Unfortunately, that is exactly what that means.  HUD will not allow things like trades or "sweat equity" (payment for work done) in the purchase reverse mortgage program.  To utilize the program, you would have to have verifiable cash down payment.  HUD guidelines go one step further and not only does the bank account where the funds are currently kept need to be verified, but the account must be verified for 3 months prior to transaction date to see that the funds were also not borrowed.  Borrowers must be able to show where any large deposits came from and that they were not borrowed as well.

Hi Bob,

The answer to all of this is yes...but there are guidelines that HUD requires lenders to follow.  The Short Sale, as with Foreclosure will not preclude you from getting a reverse mortgage, but I would have to ask if the Short Sale caused a loss on government-insured or guaranteed loan.  You would not be eligible for another government loan until all losses were paid in full.

With regard to your assets.  The insurance must have had a cash value available for which you are taking your funds and the lender would require previous statements verifying that the money was available and then a copy of the check and statement from when you cashed in the policy to verify that it was not a loan against the policy.  You can get a gift from a family member.  The family member will have to supply 3 months' bank statements to verify that they had the funds to give, a copy of the transfer of the funds and they will need to give you a gift letter that the funds are a gift, not a loan which must be repaid.

We absolutely do, and we actually fund several each month.  Our company was one of the first to really embrace the purchase reverse mortgage program, and as a result, we have been able to work with builders, realtors, borrowers, and sellers to educate them and close loans.  In most instances, we have closed reverse mortgage purchases faster and more easily than forward purchases, and we made some steadfast converts along the way.  Several of the people who were wary of this "new kind of financing" and balked at it at first asked us afterward why they hadn't heard of it before, since it was the easiest closing they'd ever had.

The borrowers do not currently have to show employment or income.  Their credit is reviewed for defaults on federal obligations, but there is no minimum credit requirement at this time.  HUD has indicated that there will be some form of financial assessment in the future, but we still do not know what the income or credit requirements will be. 

How much you can borrow depends on a number of things: the property's appraised value,  sales price or HUD Lending Limit (whichever is less), the interest rates available at the time, the loan program you choose, the fees in effect at the time, and the third-party services you and the seller choose.  While we cannot narrow them down in advance for a purchase because we do not choose the third-party services, you can get a good idea by visiting our calculator here, and be sure to check the box that says "This Reverse Mortgage is For My New Home Purchase".  Please feel free to give us a call or drop us a line if you have any questions at all!

Hi Wayne,

You have a few different issues here that can all be addressed differently. First, HUD has no seasoning requirements, but lenders now require borrowers to own and occupy the property for a minimum of 12 months before applying for a reverse mortgage. This was a move made to eliminate a problem seen earlier with family members deeding property to other senior family members solely to utilize reverse mortgage financing when they did not qualify under the age restrictions. Often the senior did not actually own the property and in many instances, did not even reside in it. The lenders added the restriction to protect themselves from the abuses.

The next issue is the issue of a gift of the down payment on a purchase transaction. HUD will allow gifts from family members for a purchase reverse mortgage, except that the individual cannot be an interested party in the transaction. In other words, the family member making the gift cannot be the seller or a real estate agent involved in the transaction.

Finally, the seller cannot waive the down payment. If this were the case, the buyer is really not actually paying the amount claimed. For example, if the purchase price is $175,000, the down payment should be $69,000, and if it is just "waived, then your uncle did not pay $175,000; he paid only $106,000, and the new benefit amount would be calculated from that number. He would still have to come in with the difference as his new down payment. This is pursuant to HUD's rules. You can find more FAQ's for Purchase here

Hi Gerald-

Let's start with the last part of your question first and work our way back. The answer to whether you can be prequalified is "yes and no." The lender can do everything they need to on your part to see of you meet the requirements for the program, but there are always a few things for the HUD requirements that cannot be 100% determined until after the property has been chosen and all parties have been run through HUD's GSA/LDP lists to determine if they are eligible to take part in a loan program with government-insured financing (not to mention the property has to meet all specified parameters and many condominium projects do not). We do multiple purchase transactions every month, and we tell borrowers to be sure to include a provision in the purchase contract for final financing approval even if a borrower has been "pre-qualified".

The benefit amount of the reverse mortgage will be determined on the lower of the Sales Price, Appraised Value, or HUD Lending Limit. The HUD Lending Limit is currently $625,500 so assuming the property you purchase is valued/purchased less than that, the benefit amount (loan amount) would be determined from the lesser of the sales price or appraised value.

Finally, the amount received under the reverse mortgage is determined by a number of things which are all put into a calculation, and if you are considering different homes and different purchase prices, the best thing to do is give the information to your reverse mortgage specialist and let him/her give you a proposal tailored to that purchase price. He/she will run the specifics based on the anticipated closing costs for that area and the sale prices you desire, and provide the information you need to decide on purchase prices you may want to consider. Give us a call, you may also find our purchase calculator helpful in estimating your required down payment.

The issue really isn't how long you have to wait. On a bona fide purchase, there is no seasoning requirement before you can do a reverse mortgage. If you bought the home for cash and moved in, you are eligible for a reverse mortgage immediately.

The issue some borrowers run into is that they try to use the current value rather than the value or sales price, whichever is less. The problem most borrowers have is that if they buy a home at auction for less than its actual value, the lender will use the current appraised value or the home's acquisition cost (purchase price) for 12 months. Lenders will allow you to use the value of any verifiable improvements you make to the home, but they will not give you credit for more than the purchase price for 12 months unless you can prove that you put the money into the property and then only the amount you actually put in.

For example, if you buy a home at auction for $100,000 and now you believe the home will appraise for $150,000 because you got such a good deal, the lender will not allow you to use the $150,000 value for the first 12 months. They would determine the amount of your benefits on the $100,000 purchase price.

On the other hand, if you bought the property for $100,000 and then put $50,000 into improvements, with receipts to show the expenditures, the lender will allow you to include these costs in the value consideration. Keep in mind, though, that if you put $50,000 into a home after you pay $100,000 and the new appraised value is $225,000, the lender will still base your eligible benefits on the purchase price plus the cash into the property, or $150,000 if you take the loan out within the first 12 months, not the higher value of $225,000. To estimate your down payment on a reverse mortgage for purchase scenario, use our HECM Purchase Calculator or call us at (800) 565-1722 for a complete analysis.