Buying a home with no monthly mortgage payments

Reverse Mortgage for Home Purchase

Introduction to Reverse Mortgages

Legal Disclaimers

• This information is published and/or provided by Plaza Home Mortgage, Inc. as a courtesy to its customers and is meant for instructional purposes only. It is not intended for consumer use. None of the information provided is intended to be legal advice in any context. Plaza makes every effort to provide accurate information; however, Plaza does not guaranty, warrant, insure or promise that it is correct; and any effort to blame Plaza if this information proves to be incorrect will be vigorously defended. All ideas expressed during this event are those of the individuals making them and are not to be imparted to the organizations they represent. Any unauthorized use, dissemination or distribution of these documents or ideas is strictly prohibited.

• Please visit our website at www.plazahomemortgage.com to view full program guidelines. The information contained in this webinar may not highlight all requirements of these programs and does not reduce or eliminate any requirements set forth in our guidelines. Guidelines are subject to change without notice.

Plaza Home Mortgage, Inc. is an Equal Housing Opportunity Lender. This is not a commitment to

lend. Information is intended for mortgage professionals only and not intended for public use or

distribution. Terms and conditions of programs are subject to change at any time. Refer to Plaza’s

underwriting and program guidelines for loan specific details and all eligibility requirements.

© 2015 Plaza Home Mortgage, Inc. All rights reserved. Company NMLS #2113.

Advantages

A senior can now leverage their crucial cash retirement assets or buy “up” vs. paying cash, as now they can finance a large portion of the transaction.

All of this without having a monthly mortgage payment.*

*Taxes and insurance must still be paid on time. Any costs to keep up property

maintenance must still be paid. Failing to meet these requirements can lead to default.

What is a Reverse Mortgage?

• A HECM (Home Equity Conversion Mortgage)

• No repayment of the loan is required until the borrower(s) no longer occupies the home as their principal residence, dies, or defaults on taxes, insurance, or home maintenance

• At that time, the mortgage is due and payable

• What is borrowed plus interest is due to the lender; remaining equity, if any, remains with the estate

How does it work

• Borrower will qualify between 52.4% to 75.0% LTV depending upon their age.

• The older the borrower, the higher the LTV.

• Translates to a down payment of 47.6% to 25%, plus closing costs.

• If potential borrower(s) fail basic minimum credit and income requirements, then a tax and insurance impound account will be required (based upon Life Expectancy). This would drastically increase the down payment requirement.

Why Use Reverse Mortgage as a Purchasing Tool?

• No monthly mortgage payments (taxes and insurance payments are required to be kept current and property must be maintained)*

• Leverage crucial retirement cash liquidity

• Buy up, get more house than paying cash

*Effective March 2, 2015, FHA requires lenders to conduct financial assessments of

prospective HECM borrowers prior to approving the loan.

Non-Recourse Loan

• The HECM is insured through FHA and is a non-recourse loan.

• That means that the homeowner or their heirs will never be asked to pay back more than the value of the home, even if the debt has grown to be greater than the value.

• If the heirs choose to keep the home, they will need to pay off the loan at 95% of the fair market value of the home, as determined by a third-party appraiser.

Fast and Easy Down Payment Figure

• Call us for an immediate down payment figure

Opportunity for your home sales

• 10,000 Baby Boomers turn 62 every day! *

• Access to new markets

• Seniors want to “age in place” (stay at home)

• Market is virtually un-tapped

*qtd in PEW Research Center Population Projections

Guidelines

Property

• Single family residences, PUDs and FHA approved Condos

• No manufactured, log, dome, farm, etc.

• No second homes or investment properties

• New construction is not eligible until the Certificate of Occupancy has been issued

• Any repairs must be satisfied by the seller prior to closing

Credit

• No NOD’s, short sale, deed in lieu, within the past three years

• General credit is a two-year look back

• All federal debt must be satisfied

• Bankruptcy seasoning is 1 day

Funds

• No loan to get our loan; business, bridge, mortgage, retirement account, credit card, etc.

• Proceeds from the sale of a business, real-estate, etc. are allowed. Paper trail must be documented.

• All funds must be seasoned for 90 days, large deposits sourced.

• Mattress money, cashiers checks, etc., will not be allowed.

Real Estate Owned

• Borrowers may keep existing Real Estate (limit 3, including subject)

• Borrowers will sign Verification of Occupancy and in some instances a Letter of Intent

• Must occupy the residence within 60 days or default under the terms of the mortgage and foreclosure proceedings can begin

No Concessions Allowed

• No seller concessions

• No lender concession

• No broker concession

• No real-estate agent (buyer or seller) concession

• No concession from any party in the transaction before, during, or after the loan closing

• No carry back financing

• No gift of equity

Gift funds are allowed! – They must be sourced

Most Common Pitfalls

1. Funds are not sourced properly with a clean paper trail

— 90 days unless from the sale of another property, business, etc.

2. Real estate agents, sellers, and brokers attempt to work in concessions

The Process / Timeline

Check turn times to ensure a smooth closing expectation for all parties

Origination Procedure for a Purchase Reverse –

This order is crucial!

1. Purchase Contract – Be sure to include Amendatory Clause!

2. Counseling

3. Certificate of Occupancy issued (New Construction Only)

4. Application / Disclosures

5. Case Assignment

6. Appraisal Order / Completed

7. Submitted

8. Conditions

9. Clear to Close

10. Fund

Thank You

Jason E Horr

Tara Mortgage Services LLC

412-922-TARA (8272)

jason@tara-mtg.net

www.tara-mtg.net