HECM & Jumbo Reverse Mortgage Purchase Q & A
Reverse Home Purchase Frequently asked Questions FAQs
On this page, we have compiled a list of Frequently Asked Questions about the HECM for Purchase program. For reverse mortgage purchase calculator, call Maggie at 800-684-9438
What are eligible property types? The property must be an eligible HECM property, owner occupied single family residence, PUDs or FHA approved condos and non-FHA approved condos for the Jumbo Reverse Mortgage Loan. (If you are considering a condo, call to find out if it is FHA approved first! Provide the property address and name of Condo Association) New construction must be fully completed, and a certificate of occupancy issued prior to application for the HECM. Jumbo Reverse Mortgages allow the Certificate of Occupancy issued prior to closing. You must occupy the home within 60 days of closing.
What fees can the seller pay and what fees must the buyer pay? All costs associated with the HECM loan must be paid by the buyer. Seller cannot pay pre-paid costs. Taxes and HOA dues are paid by the seller and buyer on a prorated basis. The Jumbo or private reverse mortgage allows the buyer and seller to pay fees according to the contract.
Under what conditions may a purchase transaction be canceled? The transaction can be canceled any time prior to the date of closing. If the borrower decides to cancel he or she must notify all parties in writing. Where earnest money has been provided, the borrower should review the sales contract to determine if the earnest money deposit is refundable.
At what point must reverse mortgage counseling be completed? Counseling is Required Prior to Completing the Loan Application and Opening Escrow!!!
Request a Pre-Counseling Packet and Counselor List and complete your counseling before making an offer. All borrowers and POA’s must receive counseling and the Counseling Certificate issued prior to starting the transaction.
How much time must pass after a shortsale or foreclosure to be eligible for a reverse purchase mortgage? Typically, three years must pass from the end of the short sale or foreclosure process to be eligible for a reverse mortgage. But there may be an exception, so please call.
Is New Construction acceptable? Yes, as long as a Certificate of Occupancy (CO) has been issued and property ready to occupy. For the HECM, the CO must be issued prior to the loan application and for Jumbo reverse mortgage, the CO must be issued prior to loan closing.
What must be included in the purchase agreement or contract of sale?
- FHA Amendatory Clause & FHA Real Estate Certification (we will provide these documents to you)
- Language indicating Seller is responsible for completing and paying for required repairs prior to closing.
- A Contract of Sale, fully executed with signatures of all parties and all amendments signed and initialed. It is recommended to include a Mortgage Contingency.
- IMPORTANT!! Contact us PRIOR to writing your offer! Put your real estate agent in touch with us first!! Reverse Mortgage purchase agreements and requirements are much different than with traditional mortgages so if you want a smooth transaction, let us help you write the offer!
What source of funds is acceptable and what documentation is needed for the down payment?
Seller concessions is NOT allowed for the HECM but seller concessions are acceptable for Jumbo programs.
Down payment requirements are higher than traditional mortgages because there must be equity available for interest to accrue over the owner’s lifetime as no monthly loan payments are required. If down payment is from bank or investment accounts, a verification of deposit along with bank statements that cover the most recent 3-month period are required on all accounts.
If a gift is being used, a gift letter, evidence of donor’s ability to provide the gift from seasoned funds and evidence that funds have been transferred into Borrower’s account prior to closing is required.
Ineligible Funding Sources include; credit card advances, bridge loans, personal loans, subordinate liens, loan discount points, interest rate buy downs, closing costs assistance, builder incentives, gifts or personal property given by the seller or any other party, seller concessions or financing, loans against borrower assets and down payment assistance programs are prohibited.
What if borrowers using the HECM for Purchase for a new primary residence choose to retain their existing home as a rental property?
Lenders must ensure that they have sufficient income to:
- Maintain the costs associated with the new home financed with the HECM for Purchase (ie: taxes, insurance, maintenance);
- Satisfy the monetary investment for the HECM for purchase transaction; and
- Continue to make the mortgage payment and tax and insurance payments on the existing mortgage of the previous residence.
How is the down payment determined? The calculation is based on age of youngest borrower, current expected interest rate and the maximum claim amount or value (the lower of the actual sales price, appraised value or FHA maximum claim amount.) Call us and we will calculate your down payment.
What documentation is required?
- Counseling Certificate (original—signed and dated prior to application and purchase agreement date)
- Legible copy of Social Security Card (social security or medicare card)
- Acceptable Photo ID (Driver’s license or senior ID)
- Complete copy of Living Trust Agreement with notary acknowledgment (if your property will held in a living trust)
- Homeowners Insurance Policy (and flood policy if required)
- If you are interested in doing the reverse mortgage for purchase right – call us today! Maggie O’Connell can be reached quickly by calling her cell phone at 800-489-0986