The Mesquite Nevada Real Estate Blog

Mesquite NV Seniors Option to Buy a Home Using a Reverse Mortgage Loan

Seniors looking to retire or relocate to Mesquite Nevada might have an opportunity to buy a little more home with a reverse mortgage.

Many of our current buyers are relocating to Mesquite and are purchasing a home for their retirement years.  They plan to live in it for the rest of their life.  Buying a home using a reverse mortgage could help a senior with limited cash to buy a home that they otherwise could not afford or even qualify for.

A person wanting to downsize and eliminate the higher maintenance and utility bills could sell their big home (in our Mesquite NV real estate market, it would be a loss if they bought in 2004-2007) then buy the smaller, more energy efficient home using a reverse mortgage with no monthly payments - and keep some of their cash.

If they are sure that want to live in the house for the rest of their life and can afford the monthly upkeep - buying a home with a reverse mortgage could be an excellent downsizing solution for some seniors who don't want or need the bigger home they currently have.

You are required to complete a financial counseling program - this can be a free phone counseling session - they want to make sure that you understand what you are doing and the costs involved -

Charles Dailey mortgages - iLoan

 

I called Charles Dailey last week for information on mortgages - specifically a reverse mortgage for someone who wants to stay in their current home.  Until then, I had no idea that a reverse mortgage could be used to buy a home.

Charles is a self described mortgage industry nerd who has been a full time loan officer and manager since 1997 - his blog is a great read - I subscribed the first time I read it.

 

Charles - Thanks for posting this one:

In October of 2008, HUD rolled out their reverse mortgage product and in March of 2009, they perfected it.  With rates expected to rise and the tax credit setto expire, many real estate professionals are looking for new and under-served markets to reach out to.  Since HUD has perfected their reverse mortgage, the Home Equity Conversion Mortgage (HECM) and the market for US residents 62 or older is expected to nearly double between now and 2050, perhaps now is their time.

A reverse mortgage is a loan where home equity is converted into a lump sum payment or series of payments to the homeowner or a combination of the two.  There no requirement for payment until all borrowers no longer live in the home but the borrower must keep the home in good repair, taxes current, insurance current and (if applicable) association dues current while they do.  The benefits of purchasing with a reverse mortgage are as follows:

  • seniors can preserve their savings
  • seniors who can't qualify for a forward mortgage due to income or credit often can qualify for a reverse mortgage
  • seniors can own their home for as long as they are alive, keep taxes current, keep insurance current and live in the home as their primary residence without needing to make a payment
  • seniors can enjoy financial security and independence (as this is a non-recourse loan)
  • seniors won't have to worry about passing on a mortgage debt to an heir

To qualify for a FHA HECM, one must be 62 years of age or older, occupy the property as your principal residence, not be delinquent on any federal debt and participate in a consumer information session given by an approved HECM counselor.  At closing, HECM borrowers must make a down payment which will be applied to satisfy the difference between the HECM principal limit and the sale price for the property, plus any HECM loan related fees that are not financed into the loan, minus the amount of the earnest deposit. 

SAMPLE TRANSACTION FOR A BUYER BORN IN 1938:

Purchase Price                                                       $300,000.00

Available Principal Limit                                      $178,546.06

Closing Costs                                                          $11,672.50

Cash Required at Closing                                    $133,126.44

They are very strict about where this down payment comes from.  It can be from such things as verified savings, retirement funds and proceeds from the sale of real estate but it may not be from any of the following:

  • FHA prohibits seller contributions (also known as "seller concessions"), the use of loan discount points, interest rate buy downs, closing cost down payment assistance, builder incentives, gifts or personal property given by the seller or any other party involved in the transaction.  This includes customary charges that are normally paid on behalf of the borrower by the seller.
  • Subordinate liens
  • Bridge loans
  • Gap financing
  • Cash withdrawals from credit cards
  • Personal loans
  • Seller financing
  • Gift funds

For seniors, buying a home is a HUGE move when done correctly.  It involves careful coordination between financial planners, a CPA, a good Realtor and a good loan officer.  Consideration as to whether a reverse mortgage should be involved or shouldn't be involved should always be evaluated as an option.

-Charles Dailey

 

                                 Mesquite Nevada Real Estate Agent  ~ ~  ERA

Virginia Hepp
 
Virginia Hepp ~ Mesquite Realtor
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Comment balloon 12 commentsVirginia Hepp - Mesquite NV REALTOR • February 28 2010 03:53PM

Comments

One thing that consumers need to be aware of is that after the borrower passes away, there is typically a finance service fee the bank charges each month ($500.00 and up depending on mortgage amount). The heir of the estate is given one year to sell the home and he must pay the monthly service fee while waiting for the home to sale. I recently had a client going through probate and he didn't know about the monthly service fee. A few months later he received a letter of intent to foreclose on the home. Pretty scary for heirs that aren't familiar with the details of a reverse mortgage.

Posted by Christopher Watters, Austin Realtor (512-829-8000) (Watters International Realty) over 8 years ago

Chris - excellent point and thank you - and I suppose that many consumers might not want to warn their heirs ahead of time - they might not even want them to know that they reverse mortgaged their home.  Although, I think the service fee might vary according to the bank.

Posted by Virginia Hepp - Mesquite NV REALTOR, Mesquite NV Homes and Neighborhoods - Search MLS (ERA - Mesquite NV Homes For Sale) over 8 years ago

Virginia - I guess what bothers me is the helping a senior "buy a home that they otherwise could not afford or even qualify for."  It feels like the situation we are currently in, just a different version.

Posted by Susan Brown (Keller Williams NE, Kingwood Texas (Humble & Atascocita too)) over 8 years ago

So hows the Mesquite queen doing?  Hopefully all still going well? :-)

Posted by Liz Moras Migic, Chilliwack, British Columbia - Realtor over 8 years ago

Susan, that could be an issue.  However, the amount of money down is substantial, the home has to be appraised - it is nothing like buying a home with the 100 % "liar's loans" that helped cause our current dilemma.

Posted by Virginia Hepp - Mesquite NV REALTOR, Mesquite NV Homes and Neighborhoods - Search MLS (ERA - Mesquite NV Homes For Sale) over 8 years ago

Hi Liz, all is well except for my broken ankle, but that is another story....

Posted by Virginia Hepp - Mesquite NV REALTOR, Mesquite NV Homes and Neighborhoods - Search MLS (ERA - Mesquite NV Homes For Sale) over 8 years ago
Great info on reverse mortgages you found for us there Virginia.
Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) over 8 years ago

Hi Virginia! Great post today on reverse mortgages. Sorry to hear about your broken ankle. OUCH!

Posted by Lizette Fitzpatrick, Lizette Realty, Lexington KY MLS - Kentucky Homes (Lizette Realty - Richmond KY) over 8 years ago

thanks for the information on reverse mortgages -

Posted by Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional, Palm Harbor, Dunedin, Clearwater, Safety Harbor (Charles Rutenberg Realty) over 8 years ago

Gary - I learned a lot from calling Charles Daily - he is a wealth of information, as soon as he posted his reverse mortgage blog - I reblogged it.

Lizette - Thanks, and Ouch! is right.

BarbaraJo - you are welcome - I had no idea that you could use them to purchase a home, they are a little different than a regular loan - I gotta study up!

Posted by Virginia Hepp - Mesquite NV REALTOR, Mesquite NV Homes and Neighborhoods - Search MLS (ERA - Mesquite NV Homes For Sale) over 8 years ago

Nice info for the Mesquite community!  Y'all get a ton of retirees moving there?

Posted by Renée Donohue~Home Photography, Western Michigan Real Estate Photographer (Savvy Home Pix) over 8 years ago

Renee - yes - the seniors love it - like me :)  It is a great place to retire - many of my 55 + buyers are looking for a second home that they can retire to later when they downsize.

Posted by Virginia Hepp - Mesquite NV REALTOR, Mesquite NV Homes and Neighborhoods - Search MLS (ERA - Mesquite NV Homes For Sale) over 8 years ago

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