Home Purchases with Reverse Mortgage - HUD Revises Deal
At the end of last year, I received notice of a couple surprising facts from the Department of Housing and Urban Development. The first was that a reverse mortgage could now be used to buy a home.
Prior to this notice, using the reverse mortgage as a means to refinance was the only option seniors had.
Now they can actually use the reverse like a forward mortgage. The difference being they don't make payments. Certainly a delight to many seniors.
The second great thing I read nearly took me off my seat; it was how they would figure the loan. The appraised value of the home would be the factor detemining the actual loan amount, not the actual sale price.
Under the current policy for the refinance using a reverse mortgage a lender loans money to the senior based upon multiple factors, but primarily on the appraised value of the home.
The mortgagee letter stated basically the same thing for home purchases. What you should understand is home purchase mortgage loan to values are normally based upon the sale price or the appraised value, whichever is lower.
Of course there would be more to it than the loan amount being based on worth, just like that.
Here's how it could play out. Say a borrower scrounges around and finds an amazing house really cheap. Its on the market for almost half of what it should be. In this circumstance, at closing the senior might not have to front anything out of pocket.
The thing about it is HUD is a pretty conservative group. Although their forward mortgage programs are fairly loose as far as credit and down payment is concerned they still require downpayment. They always seem to ask the borrower to anti up in some manner.
Well guess what? HUD agrees with me. It is too good to be true. They eliminated that clause and have reverted to traditional lending practices.
As a lender, I find it unusual how long it takes to get these Housing and Urban Development letters. I would expect them to have a myriad of attorneys checking these things up and down.
Not so, this particular letter was out no more than two months before revision.
Reverse mortgage loans used for purchases are now based upon the sale price or appraised value, whichever is lower.
Prior to this notice, using the reverse mortgage as a means to refinance was the only option seniors had.
Now they can actually use the reverse like a forward mortgage. The difference being they don't make payments. Certainly a delight to many seniors.
The second great thing I read nearly took me off my seat; it was how they would figure the loan. The appraised value of the home would be the factor detemining the actual loan amount, not the actual sale price.
Under the current policy for the refinance using a reverse mortgage a lender loans money to the senior based upon multiple factors, but primarily on the appraised value of the home.
The mortgagee letter stated basically the same thing for home purchases. What you should understand is home purchase mortgage loan to values are normally based upon the sale price or the appraised value, whichever is lower.
Of course there would be more to it than the loan amount being based on worth, just like that.
Here's how it could play out. Say a borrower scrounges around and finds an amazing house really cheap. Its on the market for almost half of what it should be. In this circumstance, at closing the senior might not have to front anything out of pocket.
The thing about it is HUD is a pretty conservative group. Although their forward mortgage programs are fairly loose as far as credit and down payment is concerned they still require downpayment. They always seem to ask the borrower to anti up in some manner.
Well guess what? HUD agrees with me. It is too good to be true. They eliminated that clause and have reverted to traditional lending practices.
As a lender, I find it unusual how long it takes to get these Housing and Urban Development letters. I would expect them to have a myriad of attorneys checking these things up and down.
Not so, this particular letter was out no more than two months before revision.
Reverse mortgage loans used for purchases are now based upon the sale price or appraised value, whichever is lower.
posted by Credit Counseling at
6:13 PM
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