For your reverse mortgage purchase transaction to go smoothly, be sure you understand the guidelines before starting your search for a home. If you are the buyer / reverse mortgage borrower or Realtor helping with the process, study these important tips to assure closing on time and without headaches.
Step one: Get Reverse Mortgage Counseling prior to shopping for a home! Once your offer is accepted, we move quickly to start the loan process to meet the time frame of your purchase agreement, typically 30 to 45 days. But the process cannot start until you present us with a reverse mortgage counseling certificate.
Finding the home you love AND that qualifies for a reverse mortgage.
Make sure the home has not been sold within the last 6 months prior to your purchase and the seller is not a family member or related party. It must be an Arm’s length transaction. If it is new construction, confirm the Certificate of Occupancy has been issued. Is the house in good condition? The seller must be willing to perform repairs prior to closing so watch out for fixer uppers or sellers not willing to repair. If you are interested in purchasing a condo, make sure the project is on FHA Condo Approval List.
Down payment requirements and sourcing funds
Down Payment requirements are higher than traditional mortgages because equity must must be available for interest to accrue since you will not be making mortgage payments. All down payment funds must be satisfactorily sourced and we will request all pages of the bank statements where funds are coming over the past 3 month period. If funds are from the sale of property we will require the HUD1 Settlement or Closing statement. The seller cannot credit any money, pay the closing costs of the buyers or provide anything that can be considered seller concessions. Ineligible funding sources include; credit card advances, bridge loans, personal loans, subordinate liens, new loans against other REO, builder incentives, loans against borrower assets, loan discount points, interest rate buy downs, closing costs assistance and gifts or personal property. Family members may provide funds towards the down payment as a gift. A letter must be provided from the donor stating the funds are in fact a gift that does not have to be repaid.
Reverse Mortgage Purchase Contract: Write the contract correctly from the start. The FHA reverse mortgage requires additional documents that must be part of the purchase contract including Real Estate Certification and Amendatory Clause. In most cases, the buyer must pay all of the closing costs so write the offer accordingly. It may mean a lower offer price to compensate for the fees the seller typically pays. And use an escrow company that specializes in reverse mortgages, you'll be glad you did!
I’m here to help you every step of the way and along with an attentive agent, we’ll get your reverse mortgage purchase closed quickly, get you in your new home and best of all, no mortgage payments!
If you are using the reverse mortgage for home purchase in California, Nevada, Arizona, Oregon, Washington or any US State, I can help... just call, let's talk!