Buying a Brand New Construction Home with
Reverse Mortgage Financing
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BORROWER MAKES NO MONTHLY MORTGAGE PAYMENTS as long as it is their primary residence, pays taxes, insurance, any property charges, and maintains it in good condition.
In order to apply for a Reverse Mortgage Buyer DOES NOT have to wait until after the property is complete and the final Certificate of Occupancy (COO or its equivalent in your area) has been filed with the Florida county, city or municipality responsible for building ordinances.
This means that the application can be signed even if the home is not 100% complete.
The Value that the Reverse Mortgage will consider to calculate the Proceeds you could receive, is determined by the lesser of the purchase price or appraised value or FHA’s maximum Loan Limit of $822,371 for 2021. (ie: a house that appraises at $900,000, the maximum value considered will be $822,375 and the loan will be based on that figure).
In General: the home should conform to other properties in the area, and there must be current sales of comparable homes in the area. If it is so rural that there are no comparable sales or so unique that it does not conform, there is no guarantee that the FHA Reverse Mortgage will be approved.
Please, continue reading.
The home can be built in any of several ways:
1) A Builder/Developer offering homes in a specific development:
In the case of a Developer most surely, he will want to close as soon as the property has the COO.
When you apply for a traditional or regular mortgage, the loan is being usually processed as the construction advances, and should be ready for closing as soon as the COO is issued. With a Reverse Mortgage, it will take a bit longer for the Lender to know if the Reverse Mortgage meets all of HUD’s guidelines and the loan can close.
If you decide to obtain Reverse Mortgage financing for the purchase, you should include in the Purchase Agreement an escape clause in case the property does not meet HUD Guidelines. Also, you might want to be prepared to purchase the home with “regular” mortgage by having your Lender pre-approve you, or buy with an “all cash” transaction.
2) A private builder building a single home as ordered by you:
You own land and contract with a builder to build a home. There are HUD Requirements that must be considered.
- If you have owned the land for over one year, then the Value for the Reverse Mortgage will be determined by taking the value of the land as determined by the appraisal and adding all verifiable costs to construct the property; or the current appraised value of the completed home or FHA’s maximum Loan Limit of $765,600, whichever is less.
- If you have owned the land for less than one year, then the Value for the Reverse Mortgage will be determined by taking the land acquisition cost plus all verifiable costs to construct the dwelling and improvements; or the current appraised value or FHA’s maximum Loan Limit of $765,600, whichever is less.
If you have any questions, Please call me today 786-262-6486 or submit the form provided below.