Buying a Home That Has a Reverse Mortgage
There is really no great difference in buying a house which has a Reverse Mortgage than buying one with any other type of mortgage:
1. OWNERS ALIVE (and legally capable of entering into a contract):
Value of the Home is greater than the Balance due on the Loan. The process is identical to any other home with another type of financing.
Value of the home is lower than the Balance due on the Mortgage. The process in this case resembles more a “SHORT SALE”. Current Mortgagee (Lender) has to approve the reduced payoff.
2. OWNERS ALIVE (but NOT legally capable of entering into a contract):
Borrower(s) Must have executed a Durable Power of Attorney prior to becoming incapacitated. Consult a competent attorney.
a. Value of the Home is greater than the Balance due on the Loan. The process is identical to any other home with another type of financing with the “Attorney in Fact” signing for the Owners.
b. Value of the home is lower than the Balance due on the Mortgage. The process in this case resembles more a “SHORT SALE”. Current Mortgagee (Lender) has to approve the reduced payoff, with the “Attorney in Fact” signing for the Owners.
3. OWNERS DECEASED:
The Mortgage becomes Due and Payable immediately upon the passing of the last Borrower. Estate would have up to six (6) months to pay the Balance due in full. This might be accomplished by either, paying, refinancing, or selling and paying. If, after doing their Due Dilligence the heirs can not do so, they might request up to two (2) extensions of 3 months each. Lender can start Foreclosure procedures at any time they choose if Due Dilligence is not being done.
Process is same as those cases above. However in this case you would deal either through the Court or the Administrator.
If the Lender forecloses or if the Owners or Heirs of the property do not want the home and deed it back to the Lender,(Deed-In-Lieu-Of-Foreclosure), then you would contact the lender and let them know that you were interested in purchasing the home and follow whatever procedures they have for purchasing REO property. Since the loan is an FHA insured loan, HUD gets involved.
The ideal situation is to try and purchase the property before the Lender forecloses or receives the property.
If you are going to obtain financing to purchase the home, it is best to be pre-approved by a Lender so you must act quickly. If it goes into Foreclosure, the payoff will be higher.
Like in any other purchase you should select a reputable Title company or Title Attorney to do title and lien search and to verify the total payoff and that the property has a Clear Title without any “clouds” or problems.
If Buyer(s) is/are 55 years of age or older, and planning to pay all cash or give a high DownPayment, they may want to consider Reverse Mortgage Home Purchase financing. Please visit:
BORROWER MAKES NO MONTHLY MORTGAGE PAYMENTS as long as it is their primary residence, pays taxes, insurance, any property charges, and maintain it in good condition.
If you have any questions, please call me or use the form provided below.