HECM for PURCHASE GUIDELINES
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There are some differences between a HECM for purchase and a traditional HECM for seniors. The major differences concern the cash required at closing, the involvement of a Realtor® in the loan process, the recommendation of a professional home inspection, and certain closing costs.
What is the Role of Real Estate Agent?
Coordinate borrower meeting with a Certified Reverse Mortgage Advisor to explain all of the ins and outs of these specialized loans. Senior should consider a written agreement – you should include contingencies for the sale of the senior’s previous home, the home inspection, etc.
Selecting a Home for Purchase & Getting an Inspection
• HUD encourages all seniors get a home inspection from a licensed professional home inspector (This is suggested but not required) Evaluates the physical condition: structure, construction, and mechanical systems Identifies items that need to be repaired or replaced prior to the scheduled closing date Estimates the remaining useful life of the major systems, equipment, structure, and finishes Buyers should be at the inspection to ask questions about the condition and maintenance Required Repairs Health and safety or structural integrity issues Must be completed prior to closing by the seller Include in purchase agreement Buyer cannot put any money into repairs before they own the home Must state offer contingent on satisfactory inspection conducted by qualified inspector Borrower may want attorney to review – increases costs but may be worth it Client may cancel transaction at any time prior to closing but this could affect earnest money deposit Both an Amendatory Clause and a Real Estate Certification are required
Same as traditional HECM loans
Cooperative units Manufactured housing built before 1976 and lacking permanent foundation Bed and breakfast properties, boarding houses
What is the monetary investment requirement?
At closing, HECM borrowers must provide a monetary investment which will be applied to satisfy the difference between the HECM principal limit and the sales price for the property, plus any HECM loan related fees that are not financed or offset by other allowable FHA funding sources. • In other words, the proceeds from the reverse mortgage and any funds from the sale of the old property (or from the borrower's savings) must be enough to purchase the new property outright. • Borrowers may provide larger investment amount in order to retain portion of HECM proceeds for future draws
Writing an offer
What are allowable funding sources?
• • • Borrower may only use their own money or money obtained from sale of assets. Withdrawals from borrower’s savings or retirement account are acceptable. Lenders will be required to verify the source of all funds prior to closing
Standard HECM closing costs plus (Varies from Sate to State)Recordation fees Transfer taxes
What funding sources are ineligible?
× × × × × × × × × Gifts Loan discount points Interest rate buy downs Closing cost assistance Builder incentives Seller contributions or seller financing Credit card advances Secured or non-secured loans from another asset (car, home equity) Bridge loans (“gap financing”) or other interim financing methods are prohibited. This restriction includes subordinate liens, personal loans, cash withdrawals from credit cards, seller financing and any other lending commitment that cannot be satisfied at closing.
Other things you should know:
There is no three day right of rescission- unlike
traditional HECM. The three-day right of rescission period is not applicable to HECM for Purchase transactions. Therefore, all initial advances may be disbursed on the day of closing by the settlement agent.
Certified Reverse Mortgage Expert
× Seller concessions are not applicable to