Tim Kemper is happy to help homeowners over the age of 62 in Chico, Redding, Paradise CA, Sacramento or anywhere in the state of California with reverse mortgages, or Home Equity Conversion Mortgages.
What is a Reverse Mortgage?
The reverse mortgage is also called a Home Equity Conversion Mortgage, or “HECM.”
The HECM is an FHA-insured loan designed for borrowers 62 years of age or older. It allows them to gain access to some of the equity in their home.
The loan does not require monthly payments for as long as the borrower lives in the home. The available benefit is based on the expected interest rate, age of the youngest borrower or eligible non-borrowing spouse, and the appraised value of home.
The loan proceeds are first used to satisfy any outstanding mortgages or liens on the subject property. The borrower can use any other funds to supplement income, or for health care, repairs, debt service, and so forth. The borrower is responsible for annual property taxes, insurance, HOA fees, maintenance and other property requirements. If you are interested in purchasing a home in Chico, Redding, Paradise CA, Sacramento or anywhere in the state of California, and are eligible for a reverse mortgage, read more to find out if a reverse for purchase is right for you.
What is a HECM for Purchase?
HECM for Purchase is a Home Equity Conversion Mortgage that allows older borrowers to purchase a new principal residence AND obtain a Reverse Mortgage in a single transaction. As with a traditional Reverse Mortgage, all borrowers must be 62 or older to qualify.
Older borrowers can use a reverse mortgage to purchase a new principal residence and downsize from their current residence, or relocate to other areas.
How does a HECM Purchase Work?
The transaction involves the sale of an existing property, or the use of funds from other approved means, toward the purchase of a new principal residence. The HECM for Purchase finances the remaining balance.
- It requires HECM Counseling Certificate and a fully-executed sales contract.
- An Amendatory/Escape Clause MUST be an addendum to the sales contract.
- The new residence must be owner-occupied within 60 days of closing.
- Out-of-pocket expenses are based on the age of the youngest borrower or eligible non-borrowing spouse, the expected interest rate of the product the borrower selects, and the appraised value of the purchased property, the sales contract price, or lending limit, whichever is lower
Why a HECM for Purchase?
No FICO score, though borrowers must have satisfactory credit and property charge payment history.
- No employment requirements, though borrowers must meet or exceed the required residual income.
- Loan to values of up to 70%, based on age qualification
- Lending amounts of up to $450,000 based on the $625,500 Maximum Claim Amount (approximate, based on age).
- No required minimum purchase price amount
- Non-recourse lending, with no personal liability.
- No monthly mortgage payments.
HECM for Purchase Process
- Consult with the Reverse Sales Professional and the real estate agent.
- The borrower receives HECM counseling from a HUD-approved agency.
- All parties execute a sales contract, Amendatory Clause and Real Estate Certificate. This includes buyers, sellers, and respective real estate agents.
- The Reverse Sales Professional takes the HECM for Purchase application and submits it with all supporting documentation.
- The appraisal, title and other services are ordered.
- The file is underwritten. Conditions, if any, are identified.
- Prior to closing conditions are satisfied, and the loan is approved.
- The Closing Department verifies fees, and the Reverse Mortgage Company communicates the exact amount the borrower needs for closing.
- The loan closes in the title company’s office and funds the same day.
Buyer and Seller Responsibilities
The seller pays ALL repair costs. Repairs must be completed before closing. There can be no seller concessions of any kind, or contributions from any other parties.
Note: This can create problems with REO properties because banks are usually not willing to complete any repairs.
The borrower (or buyer) must occupy the property within 60 days of closing, and must sign the Occupancy Affidavit in the closing package to certify occupancy.
Note: The buyer pays for costs associated with home inspection and home warranty.
Proof of Funds at Closing
The borrower must prove the funds at closing are liquid, and are not borrowed or otherwise ineligible by providing evidence that the funds come from an acceptable source, and that they have been in the account for at least three months. Acceptable documentation includes:
- Bank statements for the last three months from the borrower and ALL gift donors and/or participants in the loan.
- Full documentation of all bank account deposits.
- Fully-executed gift letter.
- Documentation of gift transfer.
- Copy of earnest money check.
- Verification of Deposit (VOD)
- Deed of Sale
- HUD-1 Settlement Statement
- Proof of liquidation of assets
Eligible and Non-Eligible Properties
- New or existing single family properties.
- New or existing 2-4 Unit residences.
- FHA-approved condominiums.
- New construction where a Certificate of Occupancy is issued BEFORE the application or services are ordered.
- Manufactured housing built after June 15, 1976.
- Bed and Breakfasts.
- Boarding houses.
- Condos that are not FHA-approved.
HECM for Purchase Examples
- Robert and Sandra, both age 62 are interested in downsizing, and moving to be closer to their grandchildren.
- They want to leave their two-story, 5 bed room home and buy into a new 55+ community. They do not want to have a mortgage payment.
- They do not want to wait until their current home sells because they could lose the option on the new home if they don’t go firm on the offer
- Robert and Sandra are introduced to a Reverse Mortgage Professional and learn the HECM for Purchase details.
- They are thrilled to only have to bring $129,000 to closing to buy the $250,000 home of their dreams.
- They pull the needed funds out of their asset account (IRA), and replenish that account when their home sells a year later.
- They have also avoided the showings and hassles experienced when you live in your home while it is listed.
- Frances, age 75, recently retired, and is considering renting or leasing a home in a condo community for $1,500 per month to be close to friends, church and the research hospital.
- She is vibrant, active and has a sharp mind.
- She is excited about the idea of having a community with activities and people she could go places with but is not sure if renting makes sense or not.
- Frances uses the HECM for Purchase to buy a $150,000 condo of her dreams with only $68,000 down.
- Frances uses the proceeds from a maturing $75,000 CD for the down payment.
- Instead of spending $72,000 over the next 4 years on rent, she is spending $65,000 to live in her own dream home. She is in a community that provides her with the activities and lifestyle she is looking for.
- Since she is in a condo, she no longer has to worry about the lawn and garden upkeep or outside maintenance.
Learn About Reverse for Purchase
To apply for a reverse mortgage in Chico, Redding, Paradise CA, Sacramento or anywhere in the state of California, contact Tim Kemper at Stanford Mortgage – your Reverse Mortgage Professional, at (530) 571-7723 today.