Last week a Senior buyer I had pre-qualified for a new home purchase was out looking in a new home development. When he explained to the site agent at the 55+ FHA approved community that he was going to finance the new house with an FHA insured (HECM) Reverse for Purchase she replied "I never heard of such a thing." She went on to tell him that they didn't offer that program and that he would need to be qualified by her loan officer for a regular loan. A few minutes later at the buyers insistence, she called me and I explained to her how the program works...
We have been working with senior homebuyers since HUD approved the HECM Reverse Mortgage program for use in purchase transactions in January of 2009. How much a borrower is eligible to borrow depends on his/her age, the program they choose and the purchase price or appraised value of the home.
Here are the basics:
- Borrowers must be 62 or older at the time of closing to qualify
- Income is not used to qualify
- There are no minimum credit standards
- There are NO monthly payments!
Borrowers are responsible for property taxes, homeowners insurance and any condo or HOA fees. The loan balance (with accrued interest) is due when they leave the home. Borrowers can make payments against the principal if they choose but are not required to and most do not. The loan has no term set term and current fixed rates are in the 4's.
Many of our reverse purchase customers could not qualify for any other loan program because of income, credit or other cash flow limitations and because they are able to double their purchasing power (vs Cash) and still have no mortgage payment they are able to buy a new home and reduce the asking price on their exit home so it will sell faster. In most cases after buying the new home their cash flow and quality of life is significantly improved.
Critics have much to say about this program, but most of the negative comments come from ignorance. The fact is, this program has one of the highest satisfaction ratings of any financial product . Senior home buyers and their agents need to take the time to look at this program with an open mind.