Reverse Mortgage For Purchase Springfield OR H4P – HECM for Purchase

How To Use A Reverse Mortgage to Purchase A Home in Springfield Oregon

A reverse mortgage purchase allows for seniors age 62 or older in Springfield Oregon to purchase a new home with HECM loan proceeds. The principal benefit to the senior is that the transaction only requires one set of closing costs vs. purchasing a home and obtaining a reverse mortgage thereafter, which will incur two complete sets of closing costs. Developed by the Housing and Economic Recovery Act of 2008, this program became live on January 1, 2009. Eligible seniors must conform to all HECM standards, each of the standard rules apply along with a few new rules and regulations.

What are the fundamentals of the H4P Program in Oregon?

Can purchase existing 1 to 4 unit properties
House will need to serve as primary residence
Once HECM purchase is complete, no additional liens are acceptable (Lender in 1st position, HUD in silent 2nd)
Will need to supply financial investment at closing from allowable funding source, see below for details
Need to live in home within Sixty days of close of escrow
Newly constructed houses must have certificate of occupancy

There are a few differences between a HECM for purchase and a standard HECM for seniors in Springfield Oregon.

The major distinctions concern the properties types which are permitted, the funds required at closing, the involvement of a realtor in the loan process, the recommendation of a qualified professional property inspection, and specific settlement fees.

Permitted HECM for Purchase Oregon Properties

Same as regular HECM loans

Ineligible Properties:

  • Cooperative units
  • Manufactured housing built before 1976 and lacking permanent foundation
  • Bed and breakfast properties, boarding houses
  • Farms with farm income or being used for agricultural purposesWhat is the monetary investment requirement?

At closing, HECM borrowers will need to produce a financial investment that will be applied to satisfy the difference between the HECM principal limit and the purchase price for the property, along with any HECM loan related expenses that are not financed or offset by other allowed FHA funding sources. Basically, the funds from the reverse mortgage as well as any cash from the sale of the old property (or from the consumer’s savings) has to be adequate to buy the new home outright.

A real difference between principal limit and sales price for the house in Springfield also includes any HECM mortgage loan related costs which are not financed or offset by other permitted funding source. Homeowners could provide a larger investment amount in order to retain a portion of HECM funds for future draws.

What are permitted investment sources?

Consumer can only use their own capital or cash obtained from selling financial assets.
Withdrawals from homeowner’s savings or pension account will be acceptable.

Loan providers are going to be required to verify the origin of all the resources before closing. A verification of deposit, in addition to the most up-to-date bank statement, could be used to verify savings and checking accounts. If there is a considerable increase in an account, or the account was opened up recently, the financial institution must get a valid explanation of the source of those funds. Such documents needs to be made available in the FHA case binder. Failure to produce the mandatory documentation could lead to a notice of rejection and delay of endorsement.

Which funding resources are ineligible?

  • Gifts
  • Loan discount points
  • Mortgage rate buy downsClosing cost assistance
  • Builders incentives
  • Seller contributions or seller financing
  • Charge card advances
  • Secured or non-secured loans from another asset (car, home equity)

Borrowers may not obtain a bridge loan (also known as “gap financing”) or take part in other interim financing techniques to meet the monetary investment requirement or payment of settlement fees necessary to finalize the purchase transaction. This restriction encompasses subordinate liens, personal loans, cash withdrawals from charge cards, seller financing and any other lending obligations that can’t be satisfied at closing.

What’s the Purpose of the Springfield Oregon Realtor?

Seniors in Springfield should consider a written agreement – make sure you include contingencies for the sale of the senior’s previous home, the home inspection, etc.

Selecting a Home for Purchase & Getting an Home inspection

All seniors are strongly encouraged by HUD to have a home inspection from a licensed qualified home inspector (It’s suggested but not mandatory)

Examines the physical condition: structure, construction, and mechanical systems
Determines items which need to be fixed or replaced before the scheduled closing date
Estimates the remaining useful life of the key systems, equipment, structure, and finishes
Buyers can be at the inspection to ask questions about the condition and maintenance

Required Repairs

  • Health and safety or architectural integrity issues
    Must be completed prior to closing by seller
  • Include in purchase agreement
  • Buyer can’t put any cash into repairs before they own the property

Writing an offer

  • Must state offer contingent on  acceptable inspection performed by qualified home inspector
  • Borrower might wish an attorney to review – raises expenses but will be worth it
  • Client may cancel transaction any time before closing but this may affect earnest money deposit

Settlement Fees

Standard HECM closing costs plus:

  • Recording fees
  • Transfer taxes – Varies from state-to-state

Other things you should consider about the reverse mortgage purchase in Springfield OR:

There’s no three day right of rescission unlike traditional HECM. The 3-day right of rescission period isn’t applicable to HECM for Purchase transactions. Therefore, all initial advances could be disbursed on the day of closing by the settlement agent. However, FHA encourages financial institutions to seek their counsel’s opinion to ensure compliance with Federal or Oregon laws.

Seller concessions are not applicable to reverse mortgages.

Existing HECM borrowers who take part in a HECM for Purchase transaction are ineligible for a reduction of the upfront MIP and loan providers will need to enter in the transaction into FHA Connection as a new HECM.

HUD-approved housing counseling agencies which are authorised to provide reverse mortgage counseling, must counsel those that anticipate making use of the HECM for Purchase option on all topics covered in this Mortgagee Letter and other HUD requirements and issuances.

Loan providers will have to be sure the house, when used as collateral for the HECM, meets the following property requirements:

1) It is the borrower’s principal residence;

2) Construction is finished and a certificate of occupancy or its equivalent has been issued;

3) Any construction home loan financing for the property, which will function as the collateral for the HECM loan, is satisfied and the HECM liens will be in a first and second lien position and, during closing, no other liens against the property exist.