Working with seniors who are interested in purchasing a retirement home using a Reverse Mortage is a challenge! They begin by thinking that this sounds "too good to be true" and need to be convinced that it does work and that it is guaranteed by the Government. As a Reverse Mortgage specialist, I have to (get to) explain the program not only to the senior but also to the selling agent, the buyers agent and the escrow/title agents. However, when the senior understands that it is very doable and insists on doing it then we're both in for the duration. This new block of buyers understand the leverage they can get without having to pay all cash and still make no payments.
The current FHA limit of $625,500 is the maximum amount of the home purchase price (appraised value) to determine the extent of the Reverse Mortgage Proceeds. The following "approximate down payment" percentages is what they are looking at:
At age 62 (the minimum): 47% down.
At age 65: 44% down
At age 70: 40% down
At age 75: 37% down
At age 80: 33% down
You can do the calculations for yourself by going to my web site @ www.homeloans.com/ken-keranen to see how much a senior is eligible for depending on their age and home value. You simply subtract the eligibilty figure calculated from the purchase price that you have loaded in and that becomes the approximate down payment needed.
In talking with the few other reverse mortgage loan officers who concentrate on the FHA HECM for Home Purchase Program, they are in agreement with me. We are working with real buyers! It is my opinion that if the Real Estate community studies this program and provides the information to seniors, the program will expand dramatically. Without Realtors helping to educate seniors, the program will continue to be a very small portion of the Reverse Mortgage volume for the foreseeable future. The senior who knows about the program and has learned exactly how it works will buy!
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