HECM’s Help Seniors Buy Homes, Save Cash
FHA LOANS, HOME LOANS, TIPS FOR SENIORS
March 7th, 2009
Reverse mortgages have traditionally been used by seniors to tap equity in
their home. Sandra Castrogiovanni, of Security 1 Lending, specializes in Home Equity Conversion Mortgages (HECM) for seniors. She addressed Realtors Wednesday touting new uses for this loan product. Seniors, age 62 or older, may want to consider a HECM if they want:
- To preserve their cash
- No monthly payment
- To qualify for a loan without any income verification
- To get a loan despite bad credit
To preserve cash, a senior may want to secure a reverse mortgage instead of paying off their new home with the cash proceeds from the sale of their previous home. The amount seniors can borrow depends on their age(s) and the appraised value of the home being purchased.
Reverse mortgages have no monthly payments-ever. In fact, the homeowner may receive a monthly payment from the homes equity. The net equity in the home is pledged to repay the HECM when the home is sold after the owner passes away. However, an extended absence for medical treatments or assisted living stay could trigger a forced sale of the home.
Since the home’s equity will be used to repay the loan, there is no requirement the borrower provide proof of income. In the event the senior is receiving monthly payments from their homes equity, the size of the payments is determined by the projected life span of the borrower(s) and equity available as security. Bad credit is not an obstacle either because the eventual sale of the property, not the seniors creditworthiness, is how the lender expects to recover their loan disbursements.
The senior can also receive a lump sum of cash to help pay for the home purchase and not receive any monthly payments. Again, the loans are set up so the senior can reside in the home for the remainder of their life. These loans are insured by FHA. Prospective borrowers will be thoroughly counseled on the ins and outs of this unusual loan. The loan fees for HECM’s are very high-over $15,000.
Here’s a few other details:
- Property must be owner occupied primary residence of borrower
- Mortgage insurance premium (MIP) required
- No seller concessions or credits
- Buyer must pay normal closing costs and seller must pay for all repairs
- No gift funds allowed to borrower
- Loan limit is $625,000 through 2009
Most importantly, use a local lender. Contact me if you have any questions.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
The current economy is a mess everybody knows it. What is amazing is how some people continue their daily life as if nothing changed and one such behavior is their attitude to their credit score. Foreclosures and just not paying laons is not a solution. Until Americans become more responsible for their debts we can not get out of the current mess. It is about time Americans educate themselves about finances and debt. Just taking debts on credit cards and home loans is not the way to go unless you understand what you are doing and face it most of us just do not. Here is a good resource to read about credit http://www.badcreditloansgenie.com Education is key after all you would not try to fix your television set without studying how to do it first but you take a mortgage without understanding the basics behind debt.
Thanks for your comment. I can’t agree with you more about borrowers needing to know and understand their loan terms. Many people (banks and borrowers), during this last boom cast good judgement aside and got caught up in the buying frenzy. In fact, many decided to utilize risky adjustable loans even though they qualified for safer, 30-year fixed rate loans. It seems we have to go through this every 10-15 years. I hope future generations of home buyers will learn from the mistakes their parents made. We all get to pay for the bad decisions of a few.
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