- Posted by: steve
- Category: mortgage articles, mortgage news, reverse mortgage
The Reverse Mortgage for Purchase program is designed to help seniors ‘right size’ their home needs, either to move closer to their families or into a senior retirement community, or even to move to a warmer climate and/or lower their overall cost of living.
Seniors, what if I told you that you could buy a house with no mortgage payments? You’d think I was crazy, wouldn’t you? Yet, this is exactly what the Federal Housing Administration (FHA) is letting senior homeowners do today – and it’s not crazy at all.
Reverse Mortgage for Purchase
The Reverse Mortgage for Purchase program is an FHA-insured home loan that lets homeowners over the age of 62 sell their home and use the equity to buy their next home. That sounds pretty typical, I know – except that borrowers under the HECM for Purchase (H4P) program pay no mortgage payments, even if the equity in their current home is less than the purchase price of their new home.
Watch this short video where Realtor Scott McAllister of Keller Williams interviews Stephen Parnell of New Florida Mortgage and asks questions about the Reverse Mortgage for Purchase program.
Here is the transcript of the interview:
Scott McAllister: Good Day Treasure Coast this is Scott McAllister, with the McAllister International Group. I’m here with Steve Parnell is one of the managing partners with New Florida Mortgage, how are you doing today.
Steve Parnell: Good, how are you doing?
Scott McAllister: Fantastic, fantastic. Today we want to give you a just a very quick taste of an overview about what’s called reverse mortgage for purchase for senior citizens. So can you give us a little heads up, what is a reverse mortgage for purchase and how does it help people?
Steve Parnell: Sure under the home equity conversion mortgage the FHA protected reverse mortgage system. They came out some years ago with HCEM for purchase.
Scott McAllister: Okay.
Steve Parnell: It’s a way for seniors over 62 to put in a down payment, which is roughly 50%, 65 years old its 50% it varies according to your age, the older you get the less down payment. But with a down payment equal to about 50% they can live in a house that perhaps they may not be able to afford to in general or may not wish to pay cash for in general, 50%, down, no mortgage payment for the rest of their lives. Now there’s not to say that the amount that they borrow doesn’t rack up interest. It does, it’s deferred until they either pass away or sell the property, it must be a primary residence to qualify but it’s a great way for seniors to look at an alternative way to finance a purchase in these times when interest rates are so low.
Scott McAllister: So if you had 100,000 cash you could potentially purchase a $200,000 home.
Steve Parnell: Exactly yes, it’s a way you know, we’ve got the snowbirds that of course move down from the north and they come, they sell their home there and typically they pay cash here, but it’s way for them to keep some of their assets for their own use in whichever way they want and defer the rest of the payment until they pass away.
Scott McAllister: Excellent, so what protections do they have to make sure that they can live in their house for the rest of their lives?
Steve Parnell: Okay, there’s a lot of misconceptions about reverse mortgages and that the bank own the house, it’s absolutely nonsense. There are so many government required protections now for the seniors. Number one is until the senior has been through independent counseling and that’s counseling with a government-approved counselor, housing counselor that has absolutely no commercial interest in the property, in the commercial deal whatsoever, they’re independent, they are paid for separately…
Scott McAllister: So they have nothing to do with your company?
Steve Parnell: Nothing to do with us, nothing to do with you. Until the potential homebuyer has been through the counseling they cannot spend any money with you, they can’t put a deposit down on a house, they can’t apply for their mortgage until they’ve been through the independent counseling, that’s the first thing. But since the housing crash of you know ’08 ’09 there’s been so many new pieces put into play to protect the seniors that it is now worthy of investigation.
Scott McAllister: Absolutely so if somebody wanted to get in touch with you to discuss reverse mortgage for purchase or anything else to do with home buying, how do they get in touch with you Steve?
Steve Parnell: Well you can either call me, you can call me directly at 561-306-6927 or email me at Steve@newfloridamortgage.com or of course contact you.
Scott McAllister: Excellent, thank you Steve. Again, I’m Scott McAllister with the McAllister International Group at Keller Williams. Hopefully we were able to give you a little bit of information or insight today, either give Steve a call or you can call me at 561-756-0891. Thank you all make it a great day.
Steve Parnell: Thank you.
See this Infographic on the Fact vs Fiction of Reverse Mortgages from The National Reverse Mortgage Lenders Association. You can click on the image for a full size version.
To qualify, a Reverse Mortgage for Purchase borrower must meet certain (reduced) income and credit requirements, and they must purchase a single family home or an FHA-approved condominium and use it as their primary residence. Borrowers are responsible for any property taxes, homeowner insurance, required maintenance, and homeowners association fees.
My thanks to Scott McAllister of McAllister International Group at Keller Williams Stuart Florida for inviting me to speak on the Reverse Mortgage for Purchase program.