Can a CHIP Reverse Mortgage be used for a New Home Purchase?
Yes! Using a Reverse Mortgage for a new home purchase is no different than completing the transaction with a normal mortgage.
Reverse mortgages are known as a way to supplement a senior’s fixed income by tapping equity that has accrued in their home. But reverse mortgages also can be used to buy a new home.
A purchase mortgage is using a reverse mortgage to purchase a home. Using a reverse mortgage to buy a house works the same way as using a reverse mortgage to refinance a home in which you currently reside. The only difference is that you are taking the reverse mortgage out on the home you are purchasing. The purchase price of your new home will consist of your down payment and any other taxes required for the closing of the property. The reverse mortgage on the home will work in place of a traditional mortgage
CHIP Reverse Mortgages
Seniors who are empty nesters or find that their existing home no longer fits their needs can use a reverse mortgage to purchase a new primary residence. New guidelines implemented in 2017, has made it easier to get a reverse mortgage on a new-construction home.
The reverse mortgage typically covers 38 to 71 percent of the new home’s purchase price. The buyer must come up with the rest from the sale of the former home, or from retirement accounts, gift money or savings.
What are the requirements?
Here is a great article on the Do's and Don'ts
When submitting your deal, make sure you have the following:
• MLS Purchase Sale Agreement
• Down payment source
An appraisal will still have to be completed, even though 99% of the time the appraiser will use the purchase price as the fair market value.
What if the client has placed an offer on a new property, but is having difficulty selling their current property?
You can use a Reverse Mortgage as a Bridge Loan.
In some scenarios, it might make sense to set-up a blanket mortgage on both properties and essentially “bridge” the gap from the time the client sells their principal residence to the time of closing on the new property. Penalties will have to be considered and costs weighed on going this route vs. private funds.
Call Terry Mason of Taylor Made Mortgages and she will answer any questions you may have in respect to Reverse Mortgages and how they will work for you.
More information on Purchasing a Home with Reverse Mortgage