Using A Reverse Mortgage to Purchase a Home

Starting in 2009 persons aged 62 and older can use a Home Equity Conversion Mortgage (HECM) to purchase a home. The HECM is FHA’s reverse mortgage product and is insured by the federal government. The purchase-to-own HECM can benefit the potential owner because there is only one set of closing costs to pay. Previously, a home owner would purchase the house, pay the closing costs, and then get a reverse mortgage, which triggered a second closing and additional closing costs. The rules for using a HECM to purchase a residence are pretty much the same as using a HECM in an already owned property.

What types of residences are eligible through the purchase-to-own HECM?

Types of residences that qualify are single family homes, one-to-four unit residential buildings, and most condominiums and townhomes; cooperatives are not eligible in Minnesota. Some manufactured homes qualify if they were built after 1976 and have a permanent foundation. Newly constructed properties must have a certificate of occupancy, the borrower must occupy the property within 60 days of closing, and it must be the principal residence.

What is the Investment?

Your investment in the new home is the difference between the net principal limit and the sales price for the property. The net principal limit is determined by the youngest borrower’s age, the interest rate and the appraised value of the property OR lending limit, less the loan and closing fees. If the borrower can bring a larger investment to closing, this permits a credit line to be established which can be used for future draws.

What are Allowable Funding Sources?

The borrower may only use their own money or money obtained from the sale of their personal assets, such as a home. Proceeds from the borrower’s savings or retirement account are also acceptable, but no additional loans may be used for the owner’s investment portion.

Confused?

If you are confused, read the article “Is a Reverse Mortgage Right for You?” then call Reverse Mortgage Counselors, Incorporated (RMCI) at 651-690-3141 or 1-888-690-7829 to set up a counseling, educational session. Counseling is required by law for anyone getting a reverse mortgage. RMCI will go over all the details and numbers with you in a one-on-one counseling session to make sure you understand this loan product and address any questions or concerns you have. Like anything, a reverse mortgage can be a great financial tool for some people and the wrong tool for others. RMCI counselors can help you see the pros and cons. RMCI is a HUD approved counseling agency.

Hospice Care

Hospice care is a package of services and programs provided to terminally ill persons and their caregivers. Hospices offer palliative care (services that do not cure illnesses, but produce the greatest degree of relief from the symptoms of a terminal illness) and supportive care. Services included are physical, psychologi- cal, spiritual and sociological care, and also bereavement—assistance to the family and caregivers after the death of the hospice patient. An interdisciplinary team of end-of-life specialists consisting of nurses, physicians, clergy/counselors, family caregivers and volunteers help provide care.

The Listings for Hospice Care, when read from left to right:

The first column gives the name of the Hospice provider and the second column lists payment options. Some Hospice providers care for people where they live while others require a move to the residence that provides the care, (Hospice Residences). Hospice providers who care for people where they reside will provide care wherever the person resides, which may be a single family detached home, a nursing home, an apartment, an assisted living residence and so on. For more information call Hospice Minnesota, 651-659-0423 or visit online www.hospicemn.org.