HECM for Purchase Training

Home Equity

Conversion Mortgage

Great Rates. Great Programs. Great Service.

LHFS Wholesale

Discover the HECM for Purchase Loan

• The HECM for Purchase Program is a Federal Housing Administration (FHA) insured home loan. It allows individuals age 62+ to buy a primary residence using a reverse mortgage.

• Most borrowers need to plan on bringing 50% to cover down payment and closing costs. (Less for the older borrowers)

Benefits

• No income qualifying• No credit qualifying• Gifts for down payment allowed• No monthly payments required• Flexibility - treat as a normal mortgage and

make payments monthly, annually or intermittently.

Eligibility Requirements

• Must be 62 or older• Receive a Counseling Certificate prior to

application (Current address on the cert)• Live in the home as primary residence • No seller, agent or lender credits or

concessions of any kind.• Property types: single family, approved condo,

2-4 units, permanently affixed manufactured homes

• Quote and obtain an engineering cert for manufactured homes.

IMPORTANT EXCEPTIONS

• If the borrower wants to retain their existing primary residence, then we have to do “limited” income qualification.

• Using the PITI and HOA dues on the existing primary AND the taxes, insurance and any HOA dues on the new home, they must debt ratio at approximately 50-55% (exceptions may be granted)

• No other debts are included in the ratio and no potential rents are included on the retained primary.

• BK, Short Sales and Foreclosures need to be seasoned one year on a HECM for PURCHASE (If Government loan, then 3 years seasoning will apply)

Benefits For Realtors

• Sell more homes to the growing Baby Boomer and Greatest Generation segment of the population– over 77,000 are turning 62 every week in the US

• Make home buying more affordable• Convert individuals from renters to homebuyers• Improve your marketing reach• Two transactions in one (Sell existing, buy new)• Appeal to investors that need cash flow• Help clients take advantage of the market and

buy their future home now!

Purchasing Power Without Monthly Mortgage Payments

• With $250,000 investment, a 70 year old can afford…

$250,000 Home

Purchased in Cash

or $500,000 Home

Purchased with a HECM for Purchase Loan

• Retired couple with strong monthly income

• 4000 square foot home did not fit their needs anymore

Scenario 1

Current home

No equity and would need to deplete retirement to purchase a smaller home

Reverse Mortgage

Solution

Purchased a home on a golf course, only diminished their retirement account a few hundred thousand – maintained lifestyle

Scenario 2

• Single Woman in her 60’s

• Income dropped and rapidly depleting her portfolio

• Downsized and sold home for 2 million, netted just over$600,000

Reverse Mortgage

Or

Put 300k down on Condo in a downtown high rise left with over 300k to replenish some of the lost retirement account

Pay All Cash

$600,000 did not buy the quality of home in the neighborhood she desired.

Scenario 3

• Couple would like to purchase first home after 28 years of renting.

• Husband retired, wife would like to retire but could not if they had a mortgage.

• Saved $200,000 for down payment.

On wife’s income

Could only qualify for a rather small mortgage, so their purchasing power only got them a 300k home.

Reverse Mortgage

Or

They could purchase a beautiful home at $475,000 and they are not using all of their savings

Scenario 4

• Real estate investor.• Owned his home nearly

free and clear. • Always struggled to

find and qualify for financing for his investment properties.

• Bought homes thru his LLC, rehabbed them and then flipped them.

Current Home

Mortgage on his home was less than 50k. Did not want to take money permanently from his primary to invest.

SolutionReverse Mortgage

Paid off his existing first and then put the other $320k into a line of credit to repeatedly acquire houses.

• Single woman in with a high end home in Del Mar, CA.

• Substantial income, but concerned with the fact that she would need to downsize in 2- 3 years.

• Did not want to sell in the depressed market.

• Did not want to have to wait to buy in an inflated market .

Solution

Reverse Mortgage

on her primary and she used the cash to purchase her “future” home at a hugely discounted price. She put renters into the new home.

Current Home

3400 sf, huge yard, pool and spa and extremely high maintenance.

Scenario 5

CHARGES AND FEES

• Buyer pays for Seller’s title and transfer tax• Buyer and Seller may split escrow• Buyer must pay for home warranty if desired• Seller must pay for and complete agreed

upon repairs prior to close of escrow• Escrow may not charge separate “junk fees”• Buyer or seller may pay for termite report• Borrowers on both refinance and purchase

must pay for their own counseling!!

ESCROW AND TITLE

• Recommend using an escrow that knows how to transact a HECM for Purchase

• Control the transaction- Talk to the agents and let them know this will be the most seamless process if they allow you to direct them to an experienced escrow.

• Remind the listing agent that the buyer is covering a large portion of the seller’s costs.

• Process once counseled can be 30-45 days

ESTIMATED AND FINAL HUDS

• Remember the “closing” is considered the date the application is signed

• The estimated HUD must be accurate – educate the escrow officer; very minimal reduction in fees is allowed…no increase.

• Look at the estimated HUD, talk to the escrow officer, don’t accept estimates.

• Recommend borrowers “wire in” their funds.• Watch for undisclosed credits…taxes and

HOA prorations are acceptable.

FINALLY

• Remember to educate both the listing and buyer’s agents; they will be a wonderful referral partner for you if they have a good experience

• A well-done purchase should leave a very positive “wake” for everyone involved.

• Remember to control the expectations of your borrower; they need to document funds just like a “regular loan”

It’s An Easy Process

• DON’T BE AFRAID, JUMP IN AND SWIM, THE WATER IS GREAT!!

SEE YOU IN ESCROW!!

LHFS Wholesale

HECM for Purchase Training

Home Equity

Conversion Mortgage

Great Rates. Great Programs. Great Service.Please note that all information is provided on this web site for informational purposes only, for the exclusive use of licensed mortgage professionals, and not for the general public. This information does not represent an offer or commitment to enter into a loan agreement by Land Home Financial Services Wholesale Division (LHFSW). Not all programs are available in all areas and rates and costs stated do not apply to all loans made. LHFSW’s underwriting guidelines and program restrictions apply. Terms and programs listed are subject to change without notice. LHFSW only conducts business in states approved to. LHFSW is a Division of Land Home Financial Services and is an Equal Housing Opportunity Lender. Click here for complete licensing information - Company NMLS #1796.