Reverse mortgage loans are one way to turn the equity in your home into cash – without having to make monthly mortgage loan payments.2 Changes by Congress to the FHA-insured reverse mortgage loan program now allow homeowners to buy a home with a reverse mortgage loan.
Although this sounds too good to be true, Americans 62 years and older can use the equity from the sale of their previous home, or other cash or savings, to move into a different home – with a single down payment. With a reverse mortgage loan you don’t make loan payments, because the loan is not due as long as you live in your home as your principal residence and you maintain it according to FHA requirements. As with all mortgage loans, you are required to pay your property taxes and homeowners insurance.
Purchasing a home with a reverse mortgage loan is similar to purchasing a home with a conventional mortgage, with two minor exceptions. Rather than determining a down payment based solely on the purchase price, the minimum down payment will be based on a factor of your age, interest rates, and the lesser of the home’s appraised value, purchase price, or FHA national lending limit. Once an offer is accepted, your Reverse Mortgage Advisor will work with the seller or seller’s agent to open escrow with a title or escrow agency familiar with reverse mortgage loans. In some instances, a conventional title company will be able to conduct reverse mortgage loan transactions – your Reverse Mortgage Advisor will be able to determine which title companies can do this for you. Reverse Mortgage appraisals, inspections, contingencies, documents, and closings are virtually the same as those with a conventional mortgage. Due to the required HUD-approved independent counseling session, some reverse mortgage loan escrow periods may be slightly longer than that of a conventional mortgage.
Basic HECM 4 Purchase Eligibility
The basic eligibility requirements to purchase a home with a reverse mortgage loan are:
- All titleholders must be aged 62 years or over
- The purchased home must be your principal residence
- The purchased home must meet HUD’s minimum property standards and be either a single-family residence, a residence in a 2- to 4-unit dwelling.
- The down payment must be from qualifying sources
- You must complete a HUD-approved counseling session