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Reverse Mortgage Home Purchase

Hi! I'm ARLO™, ask me anything about reverse mortgages for home purchase. I'll fetch your answer immedietly!
 

Answered By Our Experts

Question From Hydrick G. on 11/29/2018

I’ve been paying rent to buy payments for 3 years. My credit is bad to get financing elsewhere. I am 64 years old. I do intend to buy the house. I owe $10500 on a value of $33,000. Can the reverse mortgage people help me get this house?

Expert Answer

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.

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Question From Marcia H. on 10/21/2018

My husband and I moved from Colorado to Florida. We bought a house with a reverse mortgage, which now we have put up for sale because we hate Florida. Question is how long would it take to find out if we qualify for another reverse mortgage once we sell out house and buy another one?

Expert Answer

Hi Marcia,

You don’t even have to wait for the first home to sell.  Please feel free to go onto our site and let us show you on our real-time calculator what you could expect at this time.  If you have an idea of what your home will sell for, you should know about how much money you will walk away with and this 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.

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Question From Gerry on 10/20/2018

If I want to purchase my new home before my current home has sold can I use a bridge loan or home equity line of credit loan on my existing home for the down payment on a HECM for purchase loan?

Expert Answer

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.

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Question From Mindy on 10/09/2018

Unfortunately we are doing things in backwards order. Found a house to downsize to, made an offer which was accepted. Closing this month. However, our house hasn't sold yet, so we don't have the large down payment required until it sells. (Assuming that we cannot use our Line of Credit on our current home which is paid off?). Our real estate agent suggested that we do a conventional mortgage and then in 6 months we can refinance into a HECM. Is this true? How does this work?

Expert Answer

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.

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Question From Grace on 9/20/2018

If I only make $935 a month on ss can I qualify for reverse mortgage purchase?

Expert Answer

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 check the 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 the residual income such as dissipating assets if you have cash in the bank etc.  Asset dissipation is just a calculation HUD allows where we assign a monthly income number to cash assets depending on the amount of the asset and the borrowers age in accordance with the schedule that HUD as 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.

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Question From Anna on 8/27/2018

My mother currently has a reverse mortgage. She wants to sell the current house and move to a smaller home. Once she pays off the first reverse mortgage, can she apply for a reverse mortgage on the smaller home?

Expert Answer

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.

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Question From Al K. on 8/25/2018

Hello, I want to purchase another home in Arizona, The home will sell for approx. $400,000.00, my question is how much money will I have to put as a down payment in order to qualify to purchase the home using a reverse mortgage? I have a home now with a RM but of course will pay that loan off entirely before applying for the new RMThe main purpose for wanting another RM is so that I do "NOT" have any monthly loan payments. Thank you for your help, Al

Expert Answer

Hello Al,

The amount you have to put down 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 begin to give you accurate numbers without knowing a little more information.

However, we have made it really easy for borrowers to get this information now without having to supply a lot of personal information and without a lot of hassle or obligation.  Now you can simply visit our HECM Purchase Calculator, put in just a little information (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.

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Question From Deanna on 8/12/2018

I'm looking to do a purchase and use a HECM. What is the LTV - 50%???

Expert Answer

Hi Deanna,

HUD has made cutbacks to the program that took effect in October of 2017 but the amount varies with borrower’s ages, property values/lending limits and interest rates.  Even then, the costs vary depending on where the property is located and that 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 supply any real personal information (other than month and year of birthdates to determine benefits).  Come visit us at https://reverse.mortgage/purchase-calculator and see how the purchase reverse mortgage would work for your circumstances.

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Question From Martin H. on 8/05/2018

I turned 65 last month and am retired. I want to buy a home for me and my family near my mother-in-law to help care for her. Can I buy a home with a reverse mortgage with no money down and have my closing costs wrapped into the loan? I need the money I have saved in order to pay for movers and needed furnishings, plus my wife is in remission from cancer. Plus to move my oldest daughter and 2 grandchildren in with us and they will need stuff too?

Expert Answer

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 to see if a reverse mortgage is right for you given your requirements.

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Question From Michael O. on 7/29/2018

Can you buy a duplex with a reverse mortgage if you live in one of the units?

Expert Answer

Hi Michael,

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

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Question From Carol B. on 7/18/2018

I plan on selling my home to ugly houses and take that money and use it for the reverse mortgage for purchasing a new home. I will retire in 3 years and at that time I will probably owe 30,000.00 on my mtg. My new home will cost around 150,000.00. Will I be able to do this? Thank you for your help.

Expert Answer

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.

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Question From Julie on 6/13/2018

If we use a reverse mortgage to purchase a home (with appropriate down payment) do we still have the ability to "receive" payments from that mortgage if we are so inclined?

Expert Answer

Hi Julie,

So glad you asked this question as I believe a lot of people wonder about this 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 for receipt of funds on a purchase reverse which allows them to take less than a full draw of the full reverse mortgage available (the fixed rate requires a full draw at closing).  This does allow borrowers to then use the remaining funds for payments or a line they can access as needed, but this means they have to come in to 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 choose to use the entire loan to purchase the property and in that case, there would be no money left for monthly payments or a line of credit. 

If you will have additional funds available to you after you close your loan and are curious as to how this would affect you, please feel free to let us give you a no cost, no obligation calculation showing both options so you can't compare and choose the option that best suits your needs. 

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Question From Constance R. on 6/03/2018

I am divorced. Can I buy a house with a reverse mortgage?

Expert Answer

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. 

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Question From Sandra K. on 5/30/2018

What if i don't have the $26,000 to put in to get the reverse mortgage?

Expert Answer

Hi Sandra,

If you are short funds to close the loan, you are limited to 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 that they are giving you the funds and that they do not have to be repaid and the funds would have to be verified as being 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 that you have other than just not taking the loan and looking for other ways to get by on 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 to find a home that better suits your needs.  You can use a reverse mortgage to buy a home as well as refinance your current home.  If you can find a smaller or better suited home that is less expensive and with less 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. 

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Question From Karen on 5/13/2018

I am buying a home under reverse mortgage. Does the seller pay my real estate broker's commission?

Expert Answer

Hi Karen,

Your question is very timely.  Just a very short time ago, HUD would not allow any fees to be paid by anyone but the borrower .  They will now allow some fees to be paid by others as long as it is reasonable and customary in Athens area and does not exceed limitations.  I would encourage you to visit me at my calculator so that you can see what might be available to you.

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Question From DAWN B. on 5/09/2018

DO YOU HAVE TO HAVE A HOME TO GET A REVERSE PURCHASE?

Expert Answer

Hi Dawn,

No, there is no requirement that you currently own a home and in fact, that is what the loan will help you achieve.

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Question From John T. on 4/25/2018

I am 67 years old and my wife is 66. We want to buy a house in Pensacola fla with a reverse mortgage. Our credit is good (670). We had 2 short sales over 3 years ago. Can we buy a house and how much would our down payment be including closing costs? Thanks jack t

Expert Answer

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 24 months 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.  I would encourage you to visit me at my All Reverse Loan Optimizer where you can give me a very small amount of information (nothing really personal) and with that, I can tell you the programs available and give you accurate, up to the minute costs for your price range and area (the costs may still vary a little because you and the seller choose the service providers – not the lender – so those costs will be dependent on the providers you choose but I can get very close). 

Come visit me at my purchase calculator, and I'll show you what I can do for you.

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Question From Irene on 3/27/2018

In order to pre-qualify for a reverse mortgage to purchase a home, do I actually have to have found the home I wish to purchase first?

Expert Answer

Good Morning Irene,

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 you income and asset documentation, run your credit with your authorization, check your name and all know 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 verbiage that rates, properties, terms of sale and even other parties to the transaction may affect the 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 for what amount you will qualify in advance and how much money you would be required to put down on the purchase. 

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Question From Pat S. on 3/07/2018

We bought a condo with a reverse mortgage in 2013 in the state of Tennessee. We have lived in it since purchase. We now would like to sell it and move back to our home state of Michigan. The condo has appreciated in value and, we believe, we would still come out with enough money to purchase another home with the proper down payment for a reverse mortgage. My question: Can we purchase another home in Michigan using a reverse mortgage after selling this one as long as we have the appropriate down payment. Thank you.

Expert Answer

Hi Pat,

You can use as many reverse mortgages as you wish, the only caveats being 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 that was their 2nd or 3rd reverse mortgage after closing previous successful reverse mortgages.

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

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Question From Mark H. on 2/23/2018

I am 67 what minimum percentage would I have to put down on a $400,000 house to qualify for a reverse mortgage?

Expert Answer

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 and with just a little more information (nothing personal), I can give you a down payment number that will take all of the factors into account and is a real-time, accurate figure.  

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Question From Neil D. on 2/22/2018

I have two clients who want to move out of their homes where they had lived with their spouses for decades. Sadly their husbands have just died and they are both over 62yrs of age. Can the widows take out a reverse mortgage loan? In this case it is for one clients currently live in Ohio and wish to build in Kentucky. The other is in Kentucky and wants to build in Kentucky.

Expert Answer

Hi Neil,

I think I may be missing the gist of the question because anyone over the age of 62 who qualifies can get a reverse mortgage.  Is there something I am not reading into the question?  When you say want to move out of their house, are they selling their current home 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 do the 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.

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Question From Maria L. on 10/29/2017

My father got a reverse mortgage and i had to sign because my name was on the title. He's passed away and now the attorney for the lender called that my signature was not notorized correctly. What are my rights when the house is sold?

Expert Answer

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).

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Question From Joan on 8/12/2017

Can unmarried couple get a reverse mortgage to purchase a home together

Expert Answer

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

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Question From Juanita on 8/11/2017

I have a reverse mortgage of which I've received partial payment with the balance to be paid February 2018. I am thinking of making a permanent move to South Carolina. I have 2 questions...1. Should I accept the final payment and 2. Can I sell my house to pay off the reverse mortgage. Thx.

Expert Answer

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.

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Question From Steven H. on 7/22/2017

I own 10 acres of view property near Redmond, Or. approximate value $300,000. It has a well, a 400 sq.ft. outbuilding, and a new 1,200 sq, ft shop. I'm single and 68 years old. Is it possible to do a reverse mortgage, in order for me to build a house. Thanks, Steve

Expert Answer

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.

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Question From Jan on 7/19/2017

Is the upfront mortgage insurance premium on a Reverse Mortgage for Purchase, 2.5% of the Purchase price or the Loan Amount?

Expert Answer

It is the purchase price, the HUD lending limit ($636,150) or the appraised value, whichever is less.

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Question From Diane V. on 7/12/2017

I'm looking to purchase a home with a seller financed mortgage. My purchase price will be well below the appraised value, I will have about 55% or so equity in the property. I'm 77 in Texas. After I purchase, could I then refinance using a reverse mortgage? Or will I be subject to the 12 waiting period from Hud? According to the mortgage calculators, my age, and equity in the home, I should be able to refi for the whole amount and eliminate my monthly payment, that is the goal. Is this possible? Initially I had hoped to buy the home outright using a reverse mortgage, because of the equity involved, the numbers work in this situation, but then I found out the loan is for the appraised value, or loan amount, whichever is less. Now I'm trying to see if this is possible.

Expert Answer

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.

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Question From Dirk R. on 6/14/2017

I am researching RM options for my parents. They need to build on to their home. I'm wondering if you can structure a RM so that the value of the home after modifications is used as the property value, and use proceeds from the RM to pay for the construction.

Expert Answer

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.   

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Question From Richard D. on 6/10/2017

How can a HECM be used to purchase a new home presently under construction? Specifically, I have been told the HECM loan application cannot not be initiated until a Certificate of Occupancy (CO) has been issued on the newly built home and that the loan processing time will then take 30-45 days before HECM can be made available. Now for the concern/problem. The home builder cannot obtain a CO until the home is fully completed and ready for occupancy. Then the builder wants to close on the sale/purchase typically within a 7-day period (the purchase closing deadline) immediately following the issuance of the CO. But if the Buyer cannot access the HECM loan proceeds within a 7-day period following the CO issue date - then there is a problem. And if closing the HECM can not occur until some 45-days after issuance of the CO (also the HECM application date) then the builder has to wait out this 45-day loan processing period while the new home sits empty. Builders are typically not willing to sit on and inventory a fully completed home, once a CO has been issued, while waiting on the buyer/borrow's HECM closing. What then is the solution for the borrower? The builder wants to close its sale immediately following CO but the borrow cannot access the HECM funds until some 45-days later. It's a Big Problem!! Hopefully there is a solution and I would love to have your answer. Best Regards.

Expert Answer

Hi Richard,

You are precisely correct, and this is why we do not see the HECM for purchase currently being 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

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Question From Cindy L. on 6/08/2017

What is the required down payment for a purchase using a Reserse Mortgage? Is it a "set" amount, or is my age change the amount/percentage?

Expert Answer

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.

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Question From Jerry K. on 6/02/2017

Gentlemen: My brother in law is 73 years of age and earns about $31,000 per year with very good credit. My question is if there is any way he can use a reverse mortgage to purchase a home as a first time buyer with no closing costs and no down payment? If this cannot be done, what is the least expensive way for him to do this with the least amount of outlay? The home would be about $150,000 in the York, PA area. Moreover, he is a veteran. Awaiting any comments that you deem appropriate, I remain,Cordially -Jerry

Expert Answer

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.

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Question From Carolyn R. on 5/22/2017

If you sell a house with a reverse mortgage and want to put a reverse mortgage on another house i own is there a waiting period before i can apply for another reverse mortgage.

Expert Answer
Hi Carolyn,
 
 
The only restriction is that you cannot have more than one reverse mortgage at a time.  Therefore, you must wait until the home on which you currently have the loan is sold and completely closed and the loan is paid in full so that HUD can verify the payoff and allow a new loan to start.  There is usually about a day between the payoff of one loan before the beginning of a new loan can start in order to verify the closing.
 
You can request a reverse mortgage purchase quote here: 
https://reverse.mortgage/purchase-calculator
 
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Question From Elaine F. on 5/06/2017

I want to do a reverse mortgage for purchase. I just sold my home not even realizing (no one told me) that I could do a reverse mortgage and stay in my home. Very unhappy about that. I will receive about $120,000 for my equity after all the smoke clears. I was told that I could buy up to $290.00. However the mortgage ins costs were over $7,000 in the closing plus the 1.25 annual. Is that correct?

Expert Answer

Hi Elaine,

Borrowers do incur mortgage insurance on the FHA-insured HUD Home equity Conversion Mortgage (HECM) reverse mortgage.  The amount is determined by the value of your home for the initial premium and that is 2.5% of the value or sales price whichever is less, up to the maximum HUD lending limit of $636,150.  The annual renewal is 1.25% of the outstanding balance.  

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Question From Manuel on 4/11/2017

Can I buy my first home if I am only getting my social security and 78 years old using reverse mortgage

Expert Answer

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.

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Question From Ana H. on 3/30/2017

I already bought a property with a Reverse Mortgage. I would like to close it and by another property using the Reverse Mortgage again. The expenses of the house are paying on time every month; also I am on time with the Tax Property and the insurance of the property. MY QUESTION IS: Do I have to qualify and my credit have to be check?

Expert Answer

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.

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Question From Jack H. on 1/22/2017

I was told that when doing a reverse mortgage to purchase a new home. I must have both contracts of sale (one for the sale of my present home and one for the purchase of my new home) at the time of application. My current home is "very" salable ( I have been a Realtor for 50 years, I know) I don't want to sell my existing home until I have found the new one...also I don't want to purchase the new home with any mortgage contingency, as it weakens my position. Suggestions?

Expert Answer

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!

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Question From Bonny D. on 12/31/2016

We presently have a reverse mtg, but are thinking of downsizing, how does our reverse mtg work if we want to move into something much smaller? will we still be able to have the same program on a new property? how does it work? we are low income.

Expert Answer

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 for purchase program by completing our online intake in the top right side of our website where it says “apply today”.

We would then run your credit and check to make sure that you meet the minimum residual income requirements of the program.

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 it would allow you to leaseback 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 30 to 50% down depending on your age and the down payment requirements can be met from the proceeds of your existing home sale, or combination of those proceeds and your own assets. 

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Question From Gwen A. on 12/28/2016

I am interested in using a Reverse Mortgage to purchase a new home in the price range of $315,000 - $325,000. According to your calculator my down payment would be around $124,000 (39%). Are your fees wrapped up in the loan or are they payable at closing? Do I need to allow for escrow closing costs or are those fees wrapped up in the loan also. I am familiar with reverse mortgages as I had one on a former home but was not for purchase.

Expert Answer

The purchase calculator gives the results of the amount you would have to bring in to complete the transaction and what your initial loan balance would be.  There are additional fees, the calculator results include everything of which we are aware.

But now having said this, there are a couple things you need to know.  Firstly, you and the seller choose the service providers on a purchase so we don't know those charges and can only estimate the charges.  We don't have any additional charges built in for additional inspections or home warranties that 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 and 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.

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Question From Erhard K. on 11/08/2016

I live in a 20 story building in a Golf course Community. I am looking for a Reverse Mortgage. Why is my building not listed with HUD ? West Palm Beach, Florida

Expert Answer

Good Afternoon,

I honestly cannot answer that question without more information.  If I had the name of the project and the address, I could check the hUD website online here and see if the project was once approved, had been submitted for approval and was declined and if it was submitted and declined, for what reason(s).  But without know that information, I can't tell you if your project is not on the HUD list because it simply has never been submitted for approval, if it was once approved and the approval has expired or if it has been submitted and was rejected for some reason.  Perhaps you'd like to click on the link above and check to see if your project is listed in one of those categories to see if you can determine why it is not currently approved?

There may or may not be things you can do if your project is not now approved.  It may just need someone to request the approval and be willing to push the HOA to submit the necessary information for approval.  It may have been declined in the past for a condition that no longer exists (i.e. inadequate reserves, at one time the project was owned by too many investors and is now primarily occupied by unit owners or the project was involved in litigation, etc).  It could just be that no one ever sought FHA financing in the past and therefore no one ever applied for the HUD approval.  You never know until you look into it and many time you can find out by asking your HOA.

Finally. You may even have good news coming soon.  HUD has announced that they may reinstitute their "spot approval" process whereby condo unit owners were allowed to obtain FHA loans (including reverse) for individual units and not have to get the entire project approved.  If you are looking to move on a reverse mortgage in the very near future, fining out whether or not your project can be approved might be the quickest way to go but if you are still in the fact gathering stage, I would also advise that you keep your eyes and ears open for the HUD updates about the approval process as well.

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Question From Todd D. on 10/26/2016

I am interested in purchasing a home for $800,000 when I retire. The down payment from my current home will be about $550,000. If I get a reverse mortgage for purchase, $800,000, will I still be able to tap any funds from my original equity, and if so, what would the limit be?

Expert Answer

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

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Question From Jackie T. on 10/19/2016

Can I use a reverse mortgage to purchase a second home?

Expert Answer

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.

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Question From Barbara H. on 9/09/2016

I want to move to CO and buy a home with a RM. Do I get approved here (AZ) or there? Do I choose the home first or afterward depending on my RM? I have been qualifed here already.

Expert Answer

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!

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Question From Tom on 8/23/2016

With a reverse mortgage how much time is allowed before I move into the new home? Weeks, months, years?

Expert Answer

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

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Question From David H. on 6/22/2016

The home I want to buy should appraise for $200K, but the owners only want $124,500. for it. So at age 62 with a reverse mortgage for purchase, shouldn't I only need about $30K down payment or less to make up the difference. It is a 2 story with a full finished basement, so over 2,000 sq. ft.! That is how the scenarios on websites has read, that the place I have I can use any leftover profit from the sale of it for that down payment, fees and get the new primary residence within 60days living in it contingent upon the sale of my current place?

Expert Answer

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

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Question From JW on 6/18/2016

I am building a house and plan to move in at the age of 58. At age 62, my mortgage will be approximately 45% of the home's value (55% equity). At age 62, could I take out a reverse mortgage to payoff the original mortgage and eliminate future mortgage payments?

Expert Answer

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.

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Question From Phil S. on 6/10/2016

I wish to purchase a personal residence for approximately $800,000. What is the difference if I (A) pay cash for the property and then get a $250,000 reverse mortgage or (B) get a $250,000 reverse mortgage as part of the purchase process? I am 72 and my wife is 70 years old.

Expert Answer

Hello Phil,

Your answer is live at:

https://reverse.mortgage/purchase-new-home/

Thank you, - All Reverse 

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Question From Patrick on 5/02/2016

I am building a home that will cost $305,000. I will pay about $275,000. At what point do I receive my reverse mortgage money?

Expert Answer

Hi Patrick,

If you are building a home there are a couple of considerations that the lender must make based on HUD's 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 far as the loan process, you must make certain that you take the required reverse mortgage counseling and then the processing the loan can begin 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 in the appraisal process takes longer or if there is any kind of a cloud on title this process can take longer. The appraiser may also indicate that there is work 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 there is work to be completed on the property before he can issue a clear report that 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/build-new-home

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Question From Bill Cash on 3/27/2016

Had a reverse mortgage on a home that burn down, I paid off the loan now I need to buy a house. I have about $100,000 to put down on a house asking price $150,000. Can I use reverse mortgage for this new loan?

Expert Answer

Hi Bill,

If you paid the loan off 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. 

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Question From Pat A. on 3/09/2016

Can you purchase in the Bahamas

Expert Answer

Hi Pat,

I assume the question is can you purchase using a reverse mortgage in the Bahamas and I have to tell you that I honestly do not know.  You cannot do so with a HUD Home Equity Conversion Mortgage because the Bahamas are not part of the United States and HUD does not insure loans in foreign countries.  I honestly do not know though and so I cannot say definitively if there are any similar products available through other private or banking entities in the Bahamas. 

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Question From Carolyn K. on 12/20/2015

Could you explain how buying a home with a reverse mortgage works?

Expert Answer

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 or 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 that you really need to watch on the reverse mortgage purchase program that are just a bit different and we outline them on our reverse mortgage purchase information on our website here.  There are a few things you need to remember that are different that 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!

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Question From Phyllis on 9/19/2014

I purchased a home in March 2014 with a reverse mortgage. At closing I found out that the appraisal was more than the purchase price. How soon would I be able to re-finance this reverse mortgage in order to take advantage of equity to get cash back?

Expert Answer

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.

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Question From Madeline A. on 7/15/2014

We are looking to 'purchase' a home, closer to our children, with a reverse mortgage purchase. We have used this system before. Because of the market, good affordable properties go very fast. So . . . CAN a 'purchase' be done with advanced qualifying? In other words, can we start the process and get pre-qualified with an estimated maximum purchase price in order to be ready when we find the right property? They tell me it might take as long as 6 weeks to close a deal. (Our last RM purchase was a short sale and took 5 months!)I hope I've stated this in a clear manor. Thank you very much.

Expert Answer

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 needed from the selling lender that hung things up.

If you have a purchase that is not working with a short pay, or a foreclosure property and you look at the All Reverse FAQ's that you can find here or you can 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 exorbitantly long, don't plan on it closing in 5 days either!  The property and appraisal has to meet the HUD requirements shown on the HUD website and failure to do so does not mean that the house is not a great house, but it could mean that 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 FAQ's and ask questions in advance, there typically are not any 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 everything you can in advance. 

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Question From Florence Ebenkamp on 7/10/2014

On a reverse Mortgage, lets say I purchase a 120,000 Condo, but I have only 85,000 to pay on the Condo. Just how much of the money is available for me to use and how many years will it allow me to draw from this? By the way I am 74 years old.

Expert Answer

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.

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Question From Tracie Englen on 4/28/2014

My sister and I are both 64 and 65 years old and we are selling our homes and thought about buying a duplex and doing a reverse mortgage on the duplex. Can this be done? We do not want to live together however we want to live close to each other and be able to take care of each other in case we are ill. Please let me know and how this would work...

Expert Answer

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!

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Question From Steve on 8/02/2013

I am close to 62 years old and am looking to purchase a home with a reverse mortgage for around $350,000 in the state of WA.After escrow is closed,will I get either a line of credit or payments from this transaction? Thank you, Steve.

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Question From Marsha on 1/10/2013

Can you please explain what is meant by "no trade equity" for a reverse mortgage. We own some property free and clear that the owner of the home we wish to purchase with a reverse mortgage purchase would like to obtain as part of the purchase price. Do we have to go through an expensive "first" transaction to sell them the property, then transfer the money to the reverse mortgage purchase or is there some way we can do it as a single transaction?

Expert Answer

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.

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Question From Fanchon on 10/05/2012

Do you issue Reverse Mortgages on home purchases? Does the borrower have to be employed? Is there a credit rating check, if so, how high must the credit rating be? How much do you lend on a reverse mortgage to a 69 year old?

Expert Answer

Good Morning Franchon,

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 the reverse mortgage purchases faster and easier than the forward purchases were closing 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 in the beginning, asked us afterward why they hadn't heard of this before since it was the easiest closing they 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 of 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 on a purchase because we do not choose the third party services, you can get a good idea by visiting our calculator here and just 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!

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Question From Eugene mcwilliams on 8/30/2012

My home was sold in march 2 2012 as a short sell. Can I purchase a home as a reverse mortgage purchase?

Expert Answer

Hello Eugene,

If the loan involved in the shortsale was a conventional loan (non-FHA financing) there should be no issues with the reverse mortgage for home purchase. Fel free to use our online purchase calculator  or call us Toll Free 800-565-1722. Thank you!

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Question From Wayne on 2/26/2012

I bought a HUD REO in Nov of 2011. I re roofed it and rehab the interior. I sold the house to a Senior, my uncle, on 02/01/2012 for $175,000. The house appraised at $275,000. Can he apply for a reverse mortgage or does he need to wait a year? I was also reading that a family member can gifts the down payment to the Senior when using a reverse mortgage for a purchase But what if the family member is selling the house to his uncle. Can he, seller, gift the down payment to the buyer or waive it?

Expert Answer

Hi Wayne,

You have a few different issues here that can all be addressed differently. Firstly, HUD has no seasoning requirements but the lenders are now requiring borrowers to own and occupy the property for a minimum of 12 months prior to being able to apply 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 down payment cannot be waived by the seller. 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 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 have to still 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

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Question From Gerald on 1/04/2012

We are selling our house and plan to purchase a home in Florida. We want to know how much down payment will be required for different home prices and how is the purchased home valued under the purchase reverse mortgage program? Would it be based on Appraised value or purchase price, or lowest of the two? Can we get pre-qualified for the purchase reverse program?

Expert Answer

Hi Gerald-

Let's start with your last part of your question first and work our way back. The answer to whether or not 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 sales prices you desire and give you the information you need to make a decision as to what 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.

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Question From Martin on 12/17/2011

What if I purchase a hud owned home for cash, can I later and how much later get a reverse mortgage on same home?

Expert Answer

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 that some borrowers run in to is that they are trying to use the current value and not 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 the actual value, the lender is going to use the current appraised value, or the acquisition cost (purchase price) of the home 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 you put $50,000 into the property to improve the property and have the 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.

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