Okay, many, many people have asked me how a Reverse Mortgage for purchase works. Here it goes:
The borrowers are buying a home and they are 62 or older. The amount that the borrower will get is based on their age, the older they are, the more they get. Here is an example of a loan that I just closed:
A 68 year old couple was downsizing from their large home to a condo that they were buying for $575,000. They were eligible for about $360,000 after closing costs. They originally had wanted to use all of the proceeds from the sale of their home and a big chunk of their savings to have "no mortgage" After I spoke to them, we concluded that what they wanted was not "no mortgage" but really "no payment"
They used the Reverse for $360,000 and only used their own funds for the $215,000 remainder. They got to keep $360,000 in their savings and still have no monthly mortgage payment.
The lenders are very particular about where the other borrowers funds are coming from. The borrowers need to be able to show these funds available to them or if they are coming from a sale, they will need to show a HUD-1 from closing.
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