Purchasing a new Home with a Reverse Mortgage
By putting a modest down payment amount on the purchase of your new home, you will be able to live in your home without having to make any mortgage payments to the Bank each month as long as the property is your primary residence.
This program also grants you the security of knowing that if anything happens to either spouse, the remaining spouse can continue to live in the property for as long as you desire.
If you wish to move in the future, just sell the home, pay off the reverse mortgage balance, and you may purchase another home by using the Reverse Mortgage for Purchase Program again, and still make no payments each month.
Reverse Mortgage for Purchase Checklist.
1. Original Purchase Contract. Fully Executed.
a. No Personal items can be added to the contract.
b. No Seller Concessions allowed.
c. No side agreements with Sellers or Brokers allowed.
2. Proof of Funds for Down Payment. Bank Statements for TWO months to include all pages, incuding blank ones. A third month may be asked for before closing for final verification.
a. No large deposits allowed without acceptable explanations.
b. Gift moneys are allowed with complete paper trail from donor to applicant.
3. Certificate of Borrower Counseling. A must! We will supply a list of National, State, and Independent Counselors which the applicant can chose for their Counseling. Counseling can be done on the phone if you prefer. There is a charge of $150.00 for the Counseling.
a. Names on the Counseling Certificate must match the Social Security or Medicare card names.
b. Counseling Certificates may take up to two weeks to schedule with a Counselor.
c. Certificates are good for 6 months from date its taken.
4. At time of Application, please provide the following items:
1. Driver's License or other official picture ID. Passports are acceptable.
2. Social Security Card or Medicare Card, or 1099 statement. Award letter.
3. If the property is in a Trust, a copy of the ENTIRE TRUST must be made available.
5. Current Mortgage Statement for the current or departing home (to be paid off).
6. Homeowners Insurance Declaration page from your Insurance Company.
7. A credit card authorization form to cover the cost of APPRAISAL, and Credit report on the property.
8. Realtors must supply an Amendatory Clause signed by all Buyers, Sellers, Selling Realtor, and Buyers Realtor. AN SRPD fully executed must also be provided.
9. Sellers are not allowed by FHA regulations to pay for the following:
a. Owners Title or Lenders Title Policy.
b. Escrow fees.
c. Transfer Tax
d. Any other charges to the seller. Except for Real Estate Commissions.
The Purchase Contract should be clear of these fees, and the agreed upon purchase price can be adjusted to reflect the cost of these fees. Addendum may be required.
10. Other letters of explanations may be requested by the Underwriter to clarify any situation which may arise on the loan process.
The time frame for processing a Reverse Mortgage is about 50 to 60 days.
Non Borrowing Spouses: These are Spouses of Seniors who are not yet 62 years old, but would still like to take out a reverse mortgage on their house, while not including their under age Spouse on the loan or on title. This may have negative consequesnses later in life for both. It should be looked at with open eyes, and understand the outcome you desire.
Non Borrowing Residents: These are children or live in relatives of the applicants who live in the property, who are not 62 years of age, and will not be on Title to the property. All Non Borrowing Residents MUST participate in the Counseling Session along with the applicants and be on the Certificate as being Counseled.
Source of Down payment of Funds: Two months of Bank statements are required initially to determine the funds in the account belong to the applicants. No large deposits will be allowed. The funds for the Down Payment may come from Savings, Retirement Funds, IRA's, 401k, sale of other Real Estate, or from a Gift.
Properties allowed are: Single Family Residences, Townhouses, Duplex, 2 to 4 Family Dwellings. FHA approved Condos are also allowed. Manufactured Homes may be allowed on a case by case basis if they have been Converted to Real Property, and taxed by the County as Real Property.
Purchase Contracts cannot have any Seller paid concessions! No Personal Property may be included in a Contract. No side agreements allowed. And, no Seller paid expenses are allowed.
A one year Homeowners Insurance Policy with proper Mortgagee Clause will be required to be furnished before closing and it must be fully paid for a minimum of one year in advance.
All Reverse Mortgages required all applicants and Non Borrowing Residents to receive a Counseling Session in which the Reverse Mortgage program will be discussed so all applicants are aware of the pros and cons of the program and how it may affect them and their families in the future.
In cases where there has been a death of a Spouse, an Original Death Certificate will be required to be presented to the Title Company, and will be returned to the applicants.
If the Property will be placed in a Trust, the entire paperwork of the Trust must be supplied for review by the Lenders Legal Department. The Trust must be Revocable.
If an applicant is using a Power of Attorney in a transaction, the POA must be presented for review by the Lenders Legal Department. In addition, a Medical Doctor must provide a letter stating the applicant was of sound mind at the time the POA was executed.
It is the preference of the Lender to use a Title Company which is familiar with closing Reverse Mortgages. Note, if the seller chooses the Title Company not familiar with Reverse Mortgages, it may delay the process and possibly cost additional expenses to the applicants.
If an applicant is keeping their current residence, as a rental, and purchasing a new property as their primary residence, then the applicant will have to disclose enough INCOME to cover the costs of the mortgage payments, taxes and insurance on the current residence, plus, the costs of the taxes and insurance on the new property. The ratio required will be a 50% DTI of the monthly income. A lease will be required on the current property for a minimum of one year. A strong letter of explanation will also be needed. And proof the new property will be their primary residence will also be required by the Lender.
Note: If an applicant is deemed to be looking to do a "Buy and Bail" situation, the loan will be rejected.