A HECM for Purchase allows seniors, 62 and older, to buy a new primary residence and get a Reverse Mortgage in one transaction. This means they have more flexibility to buy the home they want and deserve, and as the first of the month rolls around, they don't have to worry about the principal and interest payment that traditionally would be due to the mortgage lender.
Key Benefits of a HECM for Purchase for seniors:
- Financial flexibility
- Buy the home you want with No Monthly Mortgage Payments
- The option to Sell or Retain your existing home
- Easy access to a non-recourse loan tailored for retirees
- Integrate your home as part of your retirement plan
- Improve your quality of life
HECM for Purchase Downsizing Tool for Professionals
1. Reverse Sales Training
HECM for Purchase for
Realtors
Revised January, 2016
NMLS# 935554
www.jeffersonreversemortgage.com 703-319-2198
2. Introduction to Realtors
Knowledge separates you from your competition.
Options for your buyers:
• Provide an alternative to the traditional Cash-Only downsizing option.
• Help your clients buy the home they want with more financial flexibility.
• Help your clients diversify by not having to have all or the majority of their funds in
the home.
• No monthly mortgage payments for more peace of mind and security in retirement.
HECM = Home Equity Conversion Mortgage-FHA-Government Insured.
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3. • HECM Features and Benefits
• Market Opportunity
• How the Program Works
• Downsizing
• Downsizing with liquidity
• Upsizing
• Upsizing with liquidity
• Advantages
• How You Can Benefit
• Property Eligibility
• Borrower Eligibility/Obligations
• The Process
• Repayment
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4. The HECM
• The Home Equity Conversion Mortgage (HECM) is
commonly known as a “reverse mortgage.” It is a loan
option that allows homeowners who are 62 and older
to convert some of their home equity into tax-free
cash.
• Homeowners continue to live in and OWN their homes.
• There are no monthly mortgage payments.
• Note: The loan must be repaid if the borrower does not
meet loan obligations, including taxes and insurance, as
well as property upkeep and maintenance.
• Most HECMs are government-insured.
IMPORTANT: This is NOT tax advice. Consult a tax professional.
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5. Market Opportunity
HECM reverse mortgages can now be used to BUY a home. This can
make the purchase of a home easier and more affordable for your clients
who are age 62 or older. And, it can help you tap into a currently under-
served market.
Current Home New House
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6. Market Opportunity, cont.
10,000 people turn 65 every day!
In 2011 nearly 500,000 households of homeowners in the age
62-plus bracket moved to different homes. This number will
continue to rise, now that the Baby Boomer generation has
begun to enter retirement.
This presents a new and growing market of potential clients
who can benefit by selling their current homes and moving into
new ones.
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7. Market Opportunity, cont.
HECM purchases can help age 62+ clients
who wish to:
• Move closer to family.
• Reduce square footage.
• Enjoy the comfort of a single-story home.
• Switch from a house to a condominium.
• Live in a neighborhood that is more social,
or which provides easier access to
shopping, medical care or other amenities.
• Upgrade to a more expensive home.
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8. How the Program Works
Instead of paying all cash or taking out a traditional mortgage, buyers use a
HECM to finance part of the purchase price. This significantly reduces the
amount of out-of-pocket funds buyers must bring to the table.
• Buyers can save and invest more of their proceeds from the sale of their current
homes.
• At closing they only bring the difference between the reverse mortgage
proceeds and the sale price.
• There are no monthly mortgage payments, and the loan does not need to be
repaid unless:
• The borrower sells the home.
• The home is no longer the primary residence of at least one of the borrowers.
• The borrower does not meet loan obligations, such as taxes, insurance or
property maintenance.
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9. Downsizing
A 70-year-old couple sell their home for $500,000 and purchase a new
home for $350,000 and do not want any monthly mortgage payments.
Without a HECM for Purchase
Sale price (old home) $500,000
Minus 8% closing costs $40,000
Net Proceeds $460,000
New Home Price $350,000
Funds remaining $110,000
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10. Downsizing with Liquidity
A 70 year old couple sell their home for
$500,000 and purchase a new home for
$350,000 and do not want any monthly
mortgage payments.
With a HECM for Purchase
Sale price (old home) $500,000.00
Minus 8% closing costs $ 40,000.00
Net Proceeds $460,000.00
New Home Price $350,000.00
HECM for purchase $167,936.95
Down payment from proceeds $167,936.95
Funds remaining $292,063.05
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11. Upsizing
A 70 year old couple sell their home for $500,000 and purchase a new
home for $700,000 and do not want any monthly mortgage payments.
Without a HECM for Purchase
Sale price (old home) $500,000
Minus 8% closing costs $ 40,000
Net Proceeds $460,000
New Home Price $700,000
Funds required $240,000
www.jeffersonreversemortgage.com 703-319-2198
12. Upsizing with Liquidity
A 70 year old couple sell their home for $500,000 and
purchase a new home for $700,000 and do not want
any monthly mortgage payments.
With a HECM for Purchase
Sale price (old home) $500,000.00
Minus 8% closing costs $ 40,000.00
Net Proceeds $460,000.00
New Home Price $700,000.00
HECM for purchase $368,939.95
Down payment from proceeds $368,939.95
Funds remaining $ 91,060.05
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13. Program Advantages
The advantages of a HECM for purchase loan include:
• Buyers spend less money out-of-pocket, and can more comfortably
afford an upgrade.
• They have the option to include a HECM line of credit as part of the
loan, which borrowers can tap into as needed.
• Borrowers can preserve assets to help fund a long retirement.
• No FICO score is required, though the borrower must have
satisfactory credit and property charge payment history.
• There are no employment requirements, though borrowers must
meet or exceed the required residual income.
• Borrowers pay NO monthly mortgage payments for as long as they
live in the home.
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14. How You Can Benefit
A HECM for purchase can give you:
• The potential for more listings and more sales.
• Access to the growing Baby Boomer market.
• The ability to help your customers purchase homes
that better suit their needs and wants.
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15. Property Eligibility
Eligible Property Types
Properties that are eligible for a HECM for purchase loan include:
• Existing single family residences more than one year old.
• Exiting single family residences less than one year old, where the Certificate of Occupancy or its equivalent has
been issued BEFORE taking the application and ordering services, etc.
NOTE: If a warranty is issued in lieu of the Certificate of Occupancy, it must be issued prior to the
application and case number assignment by an approved warranty company.
• Manufactured homes
NOTE: These must be build after June 15, 1976, have never been moved, and meet all FHA
requirements.
• Modular Homes
• FHA-Approved condominiums
• Site condominiums
• 2-4 Unit properties
Ineligible Properties
Properties that are ineligible for a HECM for purchase loan include:
• Cooperative Units (“Co-ops”)
• Bed and Breakfast properties
• Boarding houses
• Manufactured housing that does not meet FHA requirements
• Non-FHA-Approved condominium units
• Existing single family residences that are less than one year old, or new construction properties where the
Certificate of Occupancy or its equivalent was not issued prior to the application and case number.
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16. Borrower Eligibility
All borrowers must be age 62 or older.
Eligible non-borrowing spouses receive protection from
losing the home should the borrower predecease them.
Mandatory HUD counseling is required.
The home must be the primary residence and the owner
must occupy it within 60 days of closing.
Borrowers own the property and as such are responsible
for paying all property charges.
Borrowers must bring the difference between the
purchase price of the home and the HECM proceeds to
the closing table.
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17. The Process
After borrowers decide to
purchase a more desirable home,
a real estate agent can sell their
existing home, determine the
purchase price range, and identify
properties of interest.
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18. The Process, cont.
Counseling
• Clients must participate in an information
session with an independent, HUD‐approved
counselor, in person or by phone, BEFORE
completing an application.
Application
• The client applies for the HECM,
and provides the signed and
dated counseling certificate.
Financial
Assessment
Processing
• Property appraisal, processing and approval are
similar to a traditional mortgage.
Closing • Closing is typically 30 to 45 days
after application.
Effective, April 27, 2015, all prospective borrowers must
undergo a financial assessment to ensure they can meet
their loan obligations.
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19. Repayment
• Usually the last surviving borrower or the estate sells the home to repay
the loan.
• The loan can also be repaid in cash from any source, such as other
assets, proceeds from a life insurance policy, or a loan refinance.
• No debt is passed along to heirs. There is no personal liability.
• Once the loan is repaid, any remaining equity belongs to the
homeowners or their heirs.
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20. It’s About Lifestyle
Today’s buyers want the whole package
Work and volunteering
Family and friends
Appropriate maintenance-free housing
Green, energy-efficient property
Remember that buyers buy emotionally and justify
logically. Most will not move unless they’re shown
how.
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21. Thank You.
To learn more please contact:
This material is not from HUD or FHA and has not been approved by HUD or any government agency.
Jefferson Mortgage Group LLC is licensed in Virginia, Maryland, DC & Pennslvania.
Virginia State Corporation Commission License Number MC-5659 and the Pennsylvania Department of Banking & Securities #46259
The DC Department of Insurance, Securities, and Banking License #MLB935554
Maryland DLLR License #21586
An Equal Housing Lender
By refinancing the consumer's existing loan, the consumer's total finance charges may be higher over the life of the loan.
T
George Omilan, President
NMLS #873983
703 319 2198
George@jeffersonmortgage.com
This brochure is for professional distribution only and not for distribution to the general public.
NMLS# 935554 (nmls.consumeraccess.org)
www.jeffersonreversemortgage.com 703-319-2198