Instructions When Using a Reverse Mortgage to Purchase a Home

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Real Estate Agent Purchase Instructions when using a Reverse Mortgage

Using the Home Equity Conversion Mortgage for Purchase (H4P) program is a great way for seniors to take advantage of the equity in their existing home to buy a new one with very limited documentation on income.

General Tips

  • Purchase agreement and FHA Amendment should be executed / dated the same day.
  • Reference “FHA and Reverse Mortgage” on financing addendum
  • Buyers to use personal check for Earnest Money Deposit

Closing Cost Responsibilities

  • No concessions of any kind are allowed on the HECM for Purchase. No seller credits, lender credits, broker credits, discounts, builder incentives, loan discount points, interest rate buydowns, closing cost down payment assistance.
  • Borrower pays all closing costs normally associated with financing and purchasing property. Seller pays all costs normally associated with selling property.
  • Seller may not pay any Buyer’s Pre-paids or Buyer fees, including home warranties, inspections
  • Seller cannot pay for  the Owner’s Title policy.

Allowable Fees for seller to pay

  • Only fees typical to the market may be charged. Seller only pays normal, arms-length transaction costs, including transfer fee, real estate commissions, title search, etc.
  • Proration required for Taxes and HOA
  • Seller and Buyer can split the escrow costs

Inducements to Purchase

FHA does not allow any inducements to purchase from seller or any other party involved in the transaction, including charges that are customarily paid on behalf of borrower by the seller. These include:

  • Closing cost down payment assistance
  • Seller contributions or concessions
  • Use of discount points
  • Interest rate buy downs
  • Builder incentives
  • Gifts or personal property

Personal property: Personal property included in sale may require third party estimate. Lender’s accepted sales price may be reduced accordingly. Underwriters MAY allow personal property if buyer, seller and listing/closing agents agree that it did not affect final negotiated sales price and is conveying as a convenience only. Exceptions include: refrigerator, oven, range, dishwasher or any item that would cause damage to remove.

Click here to learn what Borrowers need to know about Reverse Mortgages

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