What is a Reverse Mortgage? – Purchasing or Refinancing

Purchasing or Refinancing



The FHA reverse mortgage purchase product allows eligible seniors to obtain a new residence using the proceeds of a reverse mortgage. Because you must have at least some equity in the home in order to obtain a reverse mortgage, a down payment on the new home will be necessary. Borrowers are required to occupy the new residence within sixty days of closing.

The FHA reverse mortgage purchase program was developed to enable eligible homeowners to purchase a home that better suits their needs without having to take on new mortgage payments. If there are any repairs necessary for reasons of health, safety, or structural integrity, they must be completed by the seller prior to closing. No other seller contributions are allowed on FHA reverse mortgage for purchase transactions.

The buyer cannot pay for any repairs before taking ownership and the necessary repairs must be noted in the purchase agreement. Necessary repairs include issues such as: lack of running water, leaking roof, absence of a heat source, inadequate electrical systems, inoperable doors or windows, etc.

The source of any funds that are due at closing must be verified and must either be cash on hand or proceeds from the sale of a home. Gift funds are allowed only if they are not received from anyone with a financial interest in the purchase transaction. With the exception of sale proceeds, all funds must be seasoned for sixty days prior to closing.