Jerry Newman's San Antonio, TX Blog 210-789-4216

Home Equity Conversion Mortgage For Home Purchase Comes to Texas

Texans finally approved “Reverse Mortgage to purchase a Homestead”. Yes, that’s what proposition 5 on the ballot this past General Election on November 5th, 2013 was all about. That was a constitutional amendment to authorize the making of a reverse mortgage loan for the purchase of homestead property, and to amend lender disclosures and other requirements in connection with a reverse mortgage loan.

 

Many may have been already familiar with the Reverse Mortgage Loans as they applied to homeowners who wanted to use some equity in their homes for extra retirement income, to pay off bills, to remodel their homes, to take a nice vacation, or simply to have an extra line of credit, and never have to pay it back as long as they lived in their Homestead. Well, now Texans have “Reverse for Texas”, which allows them to use the Reverse Mortgage to Purchase a Homestead. It’s called the Home Equity Conversion Mortgage For Home Purchase(HECM).

 

There are a few basics for the Reverse Mortgage Loans as disclosed by 1st Reverse Mortgage USA in San Antonio, Texas. Reverse mortgages are non-recourse loans that allow homeowners 62 years of age and older to convert home equity into tax-free cash(always consult a tax advisor).What is Non-Recourse? Great Question! It simply means that the borrower has no personal accountability to repay the loan as long as they remain in the home, since the loan is placed against the Homestead.

 

  • There are some minimal income requirements

  • Minimal credit qualifications

  • No Monthly mortgage payments required

  • Borrower must remain current on property taxes, homeowner’s insurance, & HOA dues

  • Borrowers will always retain title to the home

  • All proceeds are Tax-Free(Consult a Tax Advisor)

 

Eligibility requirements are as follows:

 

  • All borrowers on title must be at least 62 years of age

  • Borrowers must complete a counseling session from a HUD approved counseling agency. No applications are taken until after counseling.

  • Borrowers must occupy the home as their primary residence within 60 days of closing and live in the home at least 6 months of the year

  • Borrowers are required to provide a monetary investment at closing from allowable funding sources(approved sources of income)

 

What are Eligible Properties?

  • Single Family residence - Primary residence only - no HECM loans on second homes permitted

  • 2-4 Unit properties - provided the borrower occupies 1 unit

  • FHA approved condominiums

  • New Construction - Certificate of Occupancy must be issued PRIOR to application

  • All properties must meet minimum FHA appraisal requirements

  • 90 day property flipping rules apply

 

Purchase Program for Home Equity Conversion Mortgage(HECM) is available in both fixed rate and adjustable rate options.

 

  • Minimal Income & Credit Qualification

  • Easier to qualify

  • Provides more purchasing power

  • FHA Insured

  • Security of ownership vs renting

 

What are the Safeguards for the Consumer?

  • Third party counseling sessions with a HUD approved reverse mortgage counselor

  • Open-ended term (150th birthday of youngest borrower)

  • Interest Rate caps

  • Origination fee caps

  • No prepayment penalty

  • FHA Insured = Non-Recourse Feature

  • Borrowers are not personally obligated to repay the debt. The loan is repaid when the house is sold or is refinanced.  Any deficiencies are paid by FHA MIP.

 

Some Unique Purchase Issues

  • No subordinate liens against property permitted

  • Borrowers must occupy home within 60 days of closing. A verification of Occupancy is signed at application.

  • Contract of sale required for current residence even if funds are not required, to show borrower’s intent to occupy

  • If borrowers plan to retain current residence for rental or second home, must complete Purchase Questionnaire and income/assets will be reviewed to verify there is sufficient income to support the other property

  • Sellers concessions are NOT permitted

  • Non-borrowing spouse - NOT permitted

  • Power of Attorney - NOT permitted

  • All retained properties must be documented and income verified

  • NO existing FHA loans/case numbers

 

FHA has made the following clarification on HECM for Purchase Programs.  FHA prohibits any lender credits to the borrower, and any seller contributions to the borrower, even those that are normally paid on behalf of the borrower, which include owner’s title policy and the residential homeowner’s warranty. Both of those have been traditionally paid on behalf of the borrower by the seller, but FHA will allow NO Exceptions to this guideline.

 

A HECM loan does not have to be repaid until the last surviving borrower permanently vacates the property.  Borrowers may partially or fully repay the loan balance at any time without any penalty. Upon maturity event, estate typically sells the property to satisfy the current loan balance.  

 

This is an opportunity for those homeowners age 62 or older to downsize to a smaller home, or find another primary residence to live in, and NOT have to make any mortgage payments of that New Home. There are five simple steps involved in the whole process of Home Equity conversion Mortgage for Home Purchase in Texas.

 

1. Education - Meeting with all the borrowers to review all the options as well as the HUD counseling package.

2. Counseling - Once all the counseling is complete, it’s time to determine the best program to fit the borrower’s needs.

3. Application - Package is completed and signed

4. Processing - Keeping in contact with borrowers throughout the entire loan process

5. Closing - Scheduled with borrowers & closing agent. Documents are signed and loan is funded.  

 

If you know anyone, who might be interested in Purchasing a Home by using the Home Equity Conversion Mortgage Loan, Call Jerry Today at 210-789-4216.

(All Information on the Home Equity Conversion Mortgage for Home Purchase has been provided by 1ST Reverse Mortgage USA)

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Jerry Newman, REALTOR®

US Army Retired

Brown Realty

1802 NE Loop 410 Ste 520

San Antonio, TX 78217

Direct 210-789-4216

 

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Home Equity Conversion Mortgage For Home Purchase Comes to Texas
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