how to buy a house that has a reverse mortgage

Consider using a attorney even if you are not required to do so, as the full payment of your reverse mortgage must be handled correctly to prevent problems in the future.
The pay structure of a reverse mortgage means you owe only what you have received on the loan to date, plus interest and other fees the lender can charge.
Unlike traditional mortgages, where a large sum is given to the borrower at once and paid back over time, reverse mortgages have the lender paying the borrower a predetermined amount each month until the loan total is reached.
Your reverse mortgage loan will be paid in full from the proceeds of your home’s sale.
A reverse mortgage is a loan taken out against a home's equity, or part of the home's value free of other liens.

Would it make more sense for my mom to sell me the house NOW, as I could more than likely get a much lower interest rate than what is accruing on her reverse mortgage? Would this be allowable under Medicaid? Would she lose her benefits if she sold her home, especially if she received any sort of a profit after paying off the reverse mortgage, no matter how small? Thanks so much! Sorry this is so complicated, but I tried to give you all of the facts.
The Home Equity Conversion Mortgage (HECM) for Purchase was created by Congress four years ago to streamline home-buying transactions and cut costs, says Peter Bell, president of the National Reverse Mortgage Lenders Association.
For instance, a 62-year-old who buys a $400,000 home with a reverse mortgage for purchase must make a down payment of $159,450, according to a recent quote using All Reverse Mortgage Company’s calculator.
Like any reverse mortgage, the older you are, the more money you can get from the loan and the less you must bring to the closing table.
You can leave some reverse mortgage proceeds in a line of credit for future use by taking an adjustable-rate loan, and you will pay interest only on the proceeds you use.
The couple sold their home and used a "reverse mortgage for purchase" to move into a one-story house nearby last summer.
When you take out a conventional reverse mortgage, the loan proceeds are based on the equity in your home.
A reverse mortgage for purchase may help some seniors finance a new place to live.
Her heirs didn’t want to buy the house back from the mortgage company and the house has been sitting empty for four years now.
There must be some benefit the financial institution gets from holding onto the house, although they have to pay property taxes on it and it isn’t making them any money from rents or anything else we can see.
The person listed on the last mortgage document filed with the Bureau of Conveyances (for a fee, they’ll send documents) lists someone else as the holder of the mortgage but when we contacted the last listed mortgage holder, they said they’d sold it years ago.
Can they sell the property without it being officially foreclosed on? The person who they gave the reverse mortgage to died and her heirs declined buying the property back.
Do we call them on the phone and say "Hi, we want to buy a property you hold a reverse mortgage on".
If the taxes hadn’t been paid, then I may have paid them and tried a "hostile" takeover, although I think that would have to be done for ten years before it would become legal.
The taxes are paid, the heirs were offered the property at some sort of percentage of appraised value and declined.
Your American Advisors Group Reverse Mortgage loan is repaid when the last borrower leaves the home or passes away.
You may receive: The choice is ultimately yours, but your American Advisors Group Reverse Mortgage Professional can help you decide on the disbursement method that is the best option for your unique situation.
An FHA reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), is a loan insured by the United States Federal Government’s Federal Housing Administration.
At American Advisors Group, we our clients, and they us back! See our Reverse Mortgage Reviews page and get a glimpse of what it means to be a part of the American Advisors Group family.
This means that if the value of the home when sold is less than the amount of the reverse mortgage loan, the government insurance will cover the difference.
This is where your American Advisors Group Reverse Mortgage Professional comes in, to guide you in your particular situation.
Otherwise, the home is sold and the proceeds first pays off the reverse mortgage loan, and the rest goes to the heirs.
If your heirs choose to keep the home instead, they can pay back the reverse mortgage loan in other ways, such as refinancing the reverse mortgage to a conventional mortgage loan.
At American Advisors Group, our Reverse Mortgage Professionals go through a comprehensive training program and licensing process.
They also have the option to keep the home by paying off the reverse mortgage loan.
The reverse mortgage loan is covered by the government insurance.
No, these benefits will not be impacted, as a Reverse Mortgage is considered loan proceeds and not income.
Because of this, our Reverse Mortgage loan officers are thoroughly knowledgeable and strive to share as much of that knowledge with you as possible, so you are able to make an educated and informed decision.
What typically happens is that the home is sold and the proceeds pay back the reverse mortgage loan.
If you want to end the reverse mortgage after that, you may pay back the loan amount you have already received and any interest.
The definition of a reverse mortgage is simply a loan, and over the years it has continued to evolve into one of the safest mortgage products on the market today.
Your Reverse Mortgage Professional can provide your exact fees and interest rates according to what it would be for your particular situation.
To obtain a reverse mortgage, you must complete reverse mortgage counseling from a counseling agency that has been approved by the U.S. Department of Housing and Urban Development (HUD).
HECM for Purchase allows seniors, age 62 or older, to purchase a new principal residence using loan proceeds from the reverse mortgage.
A senior purchases a principal residence using 100% seller financing, signs a HECM loan application the next day or shortly thereafter and meets all eligibility criteria for obtaining a HECM.
This would be a violation of 24 Code of Federal Regulations 206.32(a), which requires all outstanding obligations connected to the HECM transaction, purchase or otherwise, to be satisfied prior to or on the date of closing.
For HECM purchase transactions only, the maximum claim amount will be the least of: 1) the appraised value; 2) sale price; or 3) FHA mortgage limit for a one family residence.
Yes, if the property will be used as collateral for the HECM and the mortgage will be held in fee simple, or on a leasehold under a lease for not less than 99 years which is renewable, or under a lease having the remaining period of not less than 50 years beyond the date of the 100th birthday of the youngest mortgagor.
The program was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction.
Lenders may request a copy of the executed HUD-1 and warranty deed, or its equivalent, to ensure transfer of title to the prospective HECM mortgagor.
After a couple weeks mucking about for resolution utilizing the obvious channels, such as the homeowners association attorney – whose job description, incidentally, does include this type of thing – I decided to go to the top of the food chain and contact my client’s US Congressman.
Imagine my surprise when I received a mini-lecture from a congressional aide, who stated with great conviction, “You can’t BUY a home with a reverse mortgage.
Answer: The loan is repaid when the last person on title moves, sells, or dies.
Answer: The home is either sold, and the proceeds from the sale repay the loan, or the family secures new financing and buys the home.
Answer: Not making payments is very different from saying the loan is never repaid.
However, they would have to do this anyway if you had a “forward” mortgage…AND they would have to make your mortgage payment every month after you were gone, or risk losing the house.
The loan is always repaid – it’s just that you don’t repay it.
You are in your home for the rest of your life – or as long as you want to live in the home as your primary residence – and never make a monthly mortgage payment.
My parents are rethinking their current Reverse Mortgage situation, so that when and if one of them pass away, they will be able to income qualify easier now.
The title does not change hands on a reverse mortgage, so you do not need to “buy” back anything.
Can my mother and I buy the house from the reverse mortgage company.
My father has passed away and my mother is listed on the reverse mortgage still.
The house is worth 450,000 and the reverse mortgage amount owed is 300,000.
The fees of course will be much lower then what was experienced during the Reverse mortgage.
The MND Q&A is a collaborative content project that unites our professional and consumer audience to answer their mortgage, real estate and housing questions.
One of the distinct advantages of the reverse mortgage is not having a payment.
You can do a loan in your name at that time or sell the home and the estate would be entitled to any equity left over after satisfying the mortgage.
Assuming your mother and/or you can qualify for a mortgage, you can simply refinance into a conventional mortgage and pay off the balance due on the reverse(plus any interest she owes.
Your mother is still on the reverse mortgage and she can pay it off at anytime.
Sure, you can pay off a reverse mortgage just as you would a regular one.
1) Why would a property acquired by the bank due to a reverse mortgage be any different from one acquired through the normal process? The latter, of course, can be sold for any price the bank agrees to sell it.
This means that when the person either moves to a nursing home or is deceased, the amount of the reverse mortgage must either be paid by any family members who would wish to keep the property or the property must be marketed for sale and the proceeds to cover the reverse mortgage must be paid to the lender and if there is any excess, it would remain with the family member who sold it.
The mortgagee shall require the mortgagor to (i) pay the mortgage balance, including any accrued interest and MIP, in full; (ii) sell the property for at least 95% of the appraised value as determined under ? 206.125(b), with the net proceeds of the sale to be applied towards the mortgage balance; or (iii) provide the mortgagee with a deed in lieu of foreclosure.
There is a house in my neighborhood that is being subject to some federal rule 24 CFR206.125, whatever that means, but it has to do with the fact that the property is foreclosed due to the previous owner (now deceased) having obtained a reverse mortgage on it when he was alive.
If neither of these happen, the lender forecloses on the property and the reverse mortgage foreclosure process starts.
When your dad dies, if he owes $50K on the reverse mortgage, you would have the option of either refinancing the home with a $50K mortgage, paying the bank $50K in cash or selling the home and giving the bank the first $50K.
For example, if his home is worth $100K and he has a $50K reverse mortgage (including all accrued interest and fees), there's nothing that would prohibit your dad from selling you the home for $50K.
In the event that he passes away, i understand that his home will more then likely be sold to repay that reverse mortgage.
I would consider letting him keep his reverse mortgage, and then buy the house when it goes in the market many years from now.
Retirement Life Funding, LLC treats all information in a confidential matter based on the highest ethical standards.
All information is subject to change without notice and this website does not include all details or program requirements.
We will not sell your personal data or information to third parties or unafiliated entities.
While monthly payments reduce a traditional mortgage’s balance, the loan balance associated with most reverse mortgages grows, because the borrower pays neither the interest nor the principal.
With a large loan balance, a reverse mortgage borrower is left with less equity and take-home money at sale than a traditional mortgage borrower.
But, unlike a borrower with a traditional mortgage — who may choose to buy and sell homes several times or more over the course of his life — a borrower with a reverse mortgage usually won’t sell his home, until he’s ready to move to a retirement or nursing home.
The reverse mortgage loan balance grows exponentially as deferred interest accumulates on the principal balance every month — in the same way compound interest can balloon savings.
Heirs have the choice of repaying the reverse mortgage loan balance or selling the home to repay the loan.
A reverse mortgage is identical to a traditional mortgage in that the home secures the loan, the loan amount is partly dependent on the home’s value and it can be sold at any time.
A reverse mortgage is a particular type of loan that allows older homeowners to convert some of the equity in their home into cash in the form of a lump sum (subject to some limitations), monthly amounts, or a line of credit, or a combination of these options.
When a person with a reverse mortgage dies, the heirs can inherit the house, but they won’t receive title to the property free and clear since it is subject to the reverse mortgage.
This is different from regular “forward” mortgages since with a reverse mortgage, the lender makes payments to the homeowner, rather than the homeowner making payments to the lender.
The Federal Housing Administration (FHA) insures most reverse mortgages, as part of its Home Equity Conversion Mortgage (HECM) program.
Also, your heirs will also need to deal with repaying the reverse mortgage otherwise the lender will foreclose.
At the opposite pole, seniors could pay all-cash for the house and retain 100 percent of the borrowing power of the reverse mortgage as a credit line that will grow over time so long as it is not used.
Senior house purchasers now fall into three groups: those who pay all-cash and intend never take a reverse mortgage; those who pay all-cash and plan to take a reverse mortgage later; and those who take a reverse mortgage when they purchase the house.
I took a hard look at this issue in an article I wrote last year –"Should I Take Out a Reverse Mortgage Now, or Wait?" I found that if interest rates are stable, the credit line available to a senior of 62 who waits 10 years before taking out the reverse mortgage was only 17 percent higher, whereas a doubling of interest rates during the period would reduce the available line by 69 percent.
Prior to 2008, the senior who wanted to combine house purchase with a reverse mortgage but could not afford to pay all-cash had to use a forward mortgage to finance the purchase, then repay it by drawing on a reverse mortgage.
Depending on the individual circumstances, a senior may prefer an in-between case where part of the borrowing power of the reverse mortgage is used to help pay for the house, and the remainder is retained for future use.
Seniors who purchase a house with a reverse mortgage must have the means to pay the difference between the sale price of the property and the maximum amount they can draw on the HECM.
In 2008, Congress authorized the HECM for Purchase program, under which seniors can buy a house and take out a HECM reverse mortgage at the same time.
In addition, seniors looking to have a new house constructed to their specifications can’t finance construction with a reverse mortgage.
As an illustration, a senior aged 62 purchasing a $300,000 house on July 25 could fund about half of it with a reverse mortgage.
The program requires that seniors using a reverse mortgage physically occupy the home as their permanent residence within 60 days of purchase.
If they elect to take one in the future, they will be older and their house will be worth more, both of which increase the amounts they can draw under a reverse mortgage.
Lenders can provide borrowers with a tremendous benefit by educating them on the various ways a reverse mortgage can be structured — whether through a refinance, a purchase or to potentially help grow their cash assets.
Executive Conversations is a HousingWire web series that profiles powerful people in the financial industry, highlighting the operations and the people that make this sector tick. In the latest installment, we sit down with Steven Klein, Director of Institutional Lending at Reverse Mortgage Solutions, to find out how reverse mortgages can benefit both borrowers and lenders.
Using a reverse mortgage for purchase allows people to buy a house — often a more desirable home — where they may spend the rest of their lives.
Heirs do have the opportunity to own the house by paying off the loan amount and interest — either with a new mortgage or by selling the house — but they can also choose to not take advantage of the opportunity.
Or — with the HECM for Purchase program — they could use a reverse mortgage for the purchase.
If it is, you can take out a loan, pay off the reverse mortgage, and either make payments to your siblings now or later, when your mother dies and you inherit the rest of her estate.
Therefore, a reverse mortgage may generally be taken out by a husband and wife who are senior citizens and while either of them live in their home as a primary residence, the loan will stay in place.
Instead of waiting for your mother to die, consider "buying" the home from her now before any more interest accrues on the reverse mortgage loan.
If you take out a loan now at 4 percent for the purchase price of the home, and pay off the reverse mortgage, which is accruing interest at 7 or maybe even 8 percent, you’ll be way ahead of the game.
For example, imagine a scenario where a very elderly homeowner takes out a reverse mortgage, then places her senior citizen child in title with her.
With Mom’s and my siblings’ concurrence, my husband and I will begin paying off the reverse mortgage, and Mom wants to put us on the deed of the house as co-owners.
One of the best parts of a reverse mortgage is that the amount owed to the lender can never exceed what the home is worth.
A reverse mortgage does not generally require any payments made by the homeowner to the lender.
Upon her death we will buy out my siblings and remain in the house and continue to pay off the reverse mortgage.
Your letter raises an interesting issue, since most reverse mortgage lenders are not set up to take multiple or even monthly payments for these loans.
Click here to fill out the confidential information request.
The difference with a reverse mortgage purchase is that determining if the borrower will meet these requirements can usually be determined prior to loan contract; and therefore all parties can enter the buy-sell process knowing that it is unlikely that the loan will fall through in the eleventh-hour.

Tags: , ,