There is not much known about the reverse mortgages in the public real estate information mainstream. Check out these valuable tips to determine if one of these loans is viable for you or for one of your clients. They are a good buying tool to evaluate when you understand the points below.
If you’re planning on purchasing a home using a HECM Reverse Mortgage Purchase Loan there are many things to be aware of before you start shopping for a home, when making the offer and during the transaction.
First, make sure you choose the right property.
Here are 6 properties that could pose a problem:
1. Condos – The project must be FHA approved
2. Short Sales – Seller must agree to pay for repairs prior to closing which may be unlikely on a short sale as seller is not making money on the sale.
3. As-Is Fixer Uppers – Seller must agree do all repairs called out in the FHA appraisal and inspections. As-is contract is unacceptable.
4. High Value Homes – The HECM maximum home value limit is $625,500. A purchase price above the HECM maximum claim amount must be additional funds from the buyer.
5. Manufactured Homes – There are many restrictions on manufactures homes that must be considered.
6. Recent Flips- Make sure the Seller has owned the property at least 91 days before the contract date.
Do the Transaction Right
1. Must be an Arm’s Length Transaction. The seller cannot be a family member.
2. Seller concessions are not allowed, including personal property listed in the contract
3. Know what fees the buyer must pay and seller cannot pay and don’t assume ‘customary’ fee splits are okay!
4. Are all those inspection reports really necessary? Some inspections call out numerous small items that add up in cost and can go over the sellers repair cost limit. Know what reports are required by the lender and what are not and be selective.
5. Document all funds for the down payment and deposit. Save all pages of bank statements, wire transfers and copies of checks. If you don’t have online banking, consider getting it now so you can get bank account documentation quickly.
6. If gift funds will be used, the gift must be from a family member or close friend and donor must provide documentation for funds.
The HECM for purchase is a great way to get the home of your dreams, but make sure it’s not a nightmare trying to get it. Call on us early and we’ll provide the guidance needed to make the process quick and easy.