Patti did a HECM (Home Equity Conversion Mortgage) reverse mortgage years ago; it was a great fit and saved her home. She was thinking about moving and called me to go over the details of how that would work. Patti was surprised to hear that she could buy a home using the home equity conversion mortgage (HECM) product and it would allow her to buy a larger home than she anticipated; all of this with no monthly mortgage payment (she did still have to pay property taxes and insurance). Even though the HECM for purchase has been in existence since 2009, most seniors and realtors are unaware that you can use a HECM reverse mortgage to actually purchase a house, new or otherwise. The senior market is really untapped with this product simply for lack of awareness. There is huge market potential for educated realtors looking to increase their closings using this FHA insured product. According to the National Association of Realtors, almost 25% of all home buyers are 62 and older; the same age required for purchasing a home with a HECM. Seniors have more buying power than younger buyers because they have the advantage of earning years of equity in the California market. There is a great opportunity and a competitive advantage to realtors that learn how to educate their clients on this financing option.
Often times a senior will choose to sell their large family home and downsize to an apartment or other rental because they cannot qualify to purchase another home. A savvy realtor would educate the seller about this HECM for purchase program and help connect them with a mortgage lender that can see if they qualify to purchase a home using a reverse mortgage; giving the realtor 2 commissions instead of one. The HECM for purchase helps retirees to purchase a more expensive home than they could with cash; helping the retiree to buy the home they really want and giving the realtor a larger commission.
The home buyer(s) must be 62 or married to someone of that age or older. The HECM for purchase allows for flexible repayment. The borrower can repay as much or as little as they choose each month; No monthly mortgage payment is required (the borrower is still responsible for paying property taxes and insurance). This feature makes it possible for retirees to get a home loan when a traditional lender would deny them due to lack of ability to repay. Repayment would be typically done once both borrowers have passed away, sell the home, or move out permanently. This program does require a down payment between 30 to 60% based on their age and the interest rate; the older the younger spouse is, the lower their required down payment. Retired seniors would often have to pay the entire purchase price in cash because they cannot qualify for a traditional loan. This allows retirees to keep more cash on hand and the ability to purchase a more expensive home than they could otherwise; all with no required monthly mortgage payments. HECM buyers can purchase SFR (Single Family Residence), FHA approved condos, townhouses, PUD’s, owner occupied 2 to 4 unit family homes, and manufactured homes meeting HUD guidelines. Brand new or existing construction can be purchased. The HECM for purchase is a non-recourse loan, meaning that they can never owe more than the property is worth. If the market crashes and the home value drops below the loan amount, nothing changes for them. They still live in the home, without a monthly monthly payment. In fact, if the heir(s) wish to purchase the home when mom and dad pass away and it is upside down on the mortgage, they can buy the home for 5% under the assessed value. After the borrower(s) pass away, any remaining equity after paying off loan, interest and fees, if any, goes to the heir(s).
Educating yourself and your buyer(s) on this product will help them accomplish their retirement goals at the same time as helping you to close more transactions and larger transactions in the coming years. There are more details as to how to proceed on a HECM for purchase, but if you reach out to me, I would be happy to send you a realtor guide to HECM for purchase.
My name is Robert Snow Krepps, NMLS # 255191 and can be reached at 877-567-7476 or firstname.lastname@example.org . You can also find a mobile friendly reverse mortgage for purchase calculator on my website at www.funds4seniors.com
HighTechLending Inc, NMLS # 7147, is an Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act.