When a person turns 62, they may decide to move to a new home. This could be for various reasons; to downsize, to be closer to family, to live in a warmer climate, or to live in a home that meets their physical needs.
At the age of 62, this move can happen with a Home Equity Conversion Mortgage (HECM), otherwise known as a reverse mortgage purchase.
How? Because a reverse mortgage purchase allows anyone 62 years or older to purchase a principal residence without having to pay monthly mortgage payments.
This works by the senior using the proceeds from the (HECM), along with equity from the sale of their home to buy a new primary residence. This is an easy process that is completed in just one transaction and requires a down payment.
What Property is Eligible for a Reverse Mortgage Purchase?
The types of property eligible for this kind of purchase include one-to-four-unit properties that are in excellent condition. In fact, the property must meet all Federal Housing Administration guidelines.
These include fixing any repairs that can cause damage to a person’s health or jeopardize the overall safety and security of the property. There must be running water, a sound roof, sufficient heating, an adequate electrical system, doors and windows that easily open and close, and no state or local code violations.
Getting an appraisal done is required for a reverse mortgage purchase to be approved. For a senior with physical issues, railings, wheelchair ramps, and other safety measures should be put in place.
The Processing of a Reverse Mortgage Purchase
A borrower can at any time cancel the reverse mortgage purchase process before the closing date. To do so, the borrower needs to notify all parties in writing. If earnest money has been provided, this may or may not be returned to the borrower according to the contract. It’s a good idea to always determine this before signing a contract for a reverse mortgage purchase.
Reverse Mortgage Purchase Funding
Funding is determined by the age of the borrower whose name is on the title or an eligible spouse who is not borrowing, as well as current interest rates, the value of your home, the sale price, and the maximum lending limit.
If both the sale of the previous home and the loan proceeds are not enough to cover the cost of the new home, it’s up to the borrower to fund the difference. To do this, borrowers can use their savings, retirement accounts, or sell off other assets.
When it comes to the down payment or closing costs, however, the borrower may not use funds from the sale of a car, investment property, second home, or a home equity line of credit.
A reverse mortgage purchase is a way for seniors to easily move to a new residence with very little hassle. It’s designed to help those who are 62 or older find the right home for their situation and help secure the funding.