Tag Archives: Reverse Mortgage

Everything You Need To Know About Purchasing A Home with A HECM Reverse Mortgage In Tennessee

What Is a HECM for Purchase?

A HECM (reverse mortgage) for Purchase is a government-backed reverse mortgage that enables seniors to purchase a new primary residence using the equity from their current home. Unlike traditional mortgages, HECM (reverse mortgage)for Purchase does not require monthly principal and interest payments. Instead, the loan is repaid when the homeowner sells the home, moves out permanently, or passes away. The Federal Housing Administration (FHA) insures these loans, providing a safety net for both lenders and borrowers.

Eligibility Requirements in Tennessee

To qualify for a HECM (reverse mortgage) for Purchase in Tennessee, applicants must meet several criteria:

Age: The borrower must be at least 62 years
Primary Residence: The new home must be the borrower’s primary residence, and they must occupy it within 60 days of closing.
Financial Assessment: While there are no minimum credit score or income requirements, the borrower must demonstrate the ability to continue paying ongoing property charges, such as property taxes, homeowners insurance, HOA fees, and maintenance costs.
Counseling: Completion of a counseling session with a HUD-approved reverse mortgage counselor is mandatory. In Tennessee, organizations like the Consumer Credit Counseling Service of Chattanooga provide this service.

Eligible Properties in Tennessee

Not all properties qualify for a HECM (reverse mortgage) for Purchase. Eligible property types include:

Single-family homes
2–4 unit homes (if the borrower occupies one unit)
FHA-approved condominiums
Townhouses and Planned Unit Developments (PUDs)
Manufactured homes (built after June 15, 1976, and meeting HUD standards)

Ineligible properties encompass:

Cooperative units
Boarding houses and bed-and-breakfast establishments
Manufactured homes built before June 15, 1976
Homes without a certificate of occupancy
Properties with construction loans not yet paid off

Financial Considerations

While HECM (reverse mortgage) for Purchase offers the advantage of no monthly mortgage payments, there are financial aspects to consider:

Down Payment: Borrowers must contribute a significant down payment, typically ranging from 45% to 70% of the home’s purchase price, depending on their The older the borrower, the lower the required down payment.
Closing Costs: These can include an upfront mortgage insurance premium (2% of the home’s appraised value), origination fees, appraisal fees, title insurance, and other third- party costs.
Sources of Funds: Acceptable sources for the down payment include personal savings, proceeds from the sale of a previous home, or gifts from family members. Borrowed funds are not permissible.

Pros and Cons of HECM (Reverse Mortgage) for Purchase Pros:

No Monthly Mortgage Payments: Freed-up cash flow for other
Non-Recourse Loan: The borrower will never owe more than the home’s value at the time the loan is repaid.
Flexible Disbursement Options: Loan proceeds can be received as a lump sum, line of credit, or monthly payments.
Tax-Free Proceeds: Funds received are generally not taxable and do not affect Social Security or Medicare benefits.

Cons:

Age-Based Loan Amounts: The amount you can borrow is influenced by your age, the home’s value, and current interest rates.
Upfront Costs: Significant initial costs, including the down payment and closing
Home Equity Reduction: Over time, the loan balance increases, potentially reducing the equity in your home.
Property Obligations: Borrowers must continue to pay property taxes, homeowners insurance, and maintain the home.

Steps to Apply for a HECM for Purchase in Tennessee

Determine Eligibility: Ensure you meet the age, residency, and financial
Select a HUD-Approved Counselor: Complete a counseling session with an approved agency like the Consumer Credit Counseling Service of Chattanooga.
Choose a Lender: Research and select a lender experienced in HECM (reverses mortgage) for Purchase Mortgage South has helped more homeowners purchase homes with a HECM (reverse mortgage) than any other local lender.
Property Selection: Identify a property that meets eligibility
Application Process: Submit your application, including necessary documentation and proof of The experienced professionals at Mortgage South can guide you through the process easily.
Loan Processing and Closing: Upon approval, Mortgage South will be with you every step of the way to guide you through your closing with a local titles agency in the greater Chattanooga, TN or greater Nashville, TN areas.

Mortgage South: Your Trusted Partner in Tennessee

Mortgage South has been a pioneer in reverse mortgages in Tennessee, originating the state’s first reverse mortgage in 1993. With over 30 years of experience, Mortgage South has assisted more than 3,000 homeowners in Tennessee and North Georgia in utilizing their home equity to enhance their retirement. The company is committed to providing personalized service and expert guidance throughout the reverse mortgage process. (Reverse Mortgages In Chattanooga, Nashville, Knoxville TN., About Us – Mortgage South Reverse Mortgages )

Conclusion

A HECM for Purchase can be an excellent option for Tennessee seniors looking to purchase a new primary residence without the burden of monthly mortgage payments. By understanding the eligibility requirements, financial considerations, and steps involved, you can make an informed decision about whether this program aligns with your financial goals and housing needs.

If you’re considering this option, call Nathan Guerrero at Mortgage South, the local expert to explore how a HECM can help you purchase your dream retirement home.

What is “FHA Insurance” on a Reverse Mortgage?

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You may have heard “federally insured” or “FHA insured” when talking about a reverse mortgage loan, but what does that actually mean? It is actually an integral part of the reverse mortgage and extremely beneficial to the borrowers.

A federally-insured reverse mortgage assures that, as the borrower, you will receive certain loan payments as agreed upon by the terms of your loan. Also, you or your heirs will never be forced to repay more than your home is worth to pay off the loan, regardless of the loan’s balance.

This is important because it ensures two things –

The reverse mortgage insurance guarantees that these loan proceeds will be disbursed to the borrower as agreed upon under the loan terms. The loan proceeds are guaranteed even if the lender goes out of business. Similarly, with a line of credit, the lender cannot cancel or freeze the line of credit when this insurance is in place.
The insurance protects all parties in the transaction, including the borrower, the lender, the borrower’s heirs, and the investors who buy the securities backed by the loans. The insurance makes the program possible for borrowers.

“While these [reverse mortgages] got a bad rap in the late 90s and early 2000s, they have changed what needed to change. A reverse mortgage can be an excellent option for qualified borrowers who need to access their home equity and may not have the income or life expectancy to qualify for a traditional first or second mortgage or even a HELOC,” says Eddie Martini, strategic financing and real estate investment advisor at Real Estate Bees, and wealth coach at Martini Legacy.

Like many Americans, you may be concerned about the economy and struggling to manage issues like high inflation and interest rates. At the same time, you may also have enjoyed home price appreciation over the past few years. In Chattanooga, home values have gone up 6.6% over the past year. In Nashville, home values have increased an average of 12.9% over the past year. This home price appreciation has given homeowners significant amounts of home equity to tap into. More home equity, as well as an insured reverse mortgage loan, may be the retirement security you are looking for. And we at Mortgage South want to help you see if a reverse mortgage can help you achieve retirement security. Mortgage South is local and you deal with a professional that has been doing these since their inception. Give Nathan a call, you will not be disappointed even if you find this is not a perfect fit, he can point you in a direction that might help. If you are in Chattanooga or the surrounding area, please call (423) 624-3878. If you are in the Greater Nashville area, please call (615) 657-5878.

How Inflation is affecting seniors and how a Reverse Mortgage could help

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Inflation soared in 2022. According to the U.S. Bureau of Labor Statistics, inflation is around 7% at the start of 2023, but it still towers over consumer prices from just a few years ago. As Coin News’ U.S. Inflation Calculator highlights, inflation rates stood at a mere 1.4% in 2020 and crouched around 0.7% in 2015. Overall, the inflation rate appears to be creeping downward, but it has a long way to go before it falls back to recent norms.

How is inflation affecting seniors? Nearly 90% of seniors think the United States is experiencing a retirement savings crisis (According to an AAG study). While most Americans probably consider inflation in the short term when they go to the grocery store to buy food or fill up their vehicle with fuel, over time inflation can seriously devalue your savings and income. Understanding how inflation may hurt your retirement strategy is a must for ensuring that you have enough assets to last through your later years.

Let’s look at how retirees pay for expenses when they’re no longer working. While many seniors rely on Social Security, which will provide the majority of retiree income, they will likely need more income. Not all sources of income are the same, and some provide better protection against inflation compared to others. This leaves many seniors with a few choices: continue to work, sell off stocks, make extra withdrawals from retirement accounts, or use their largest asset – their home.

According to Shelley Giordano, the Chair of the Funding Longevity Task Force, a coalition of retirement and housing thought-leaders, “more retirees could benefit from accessing home equity strategically through the use of a reverse mortgage.” If you are 62 or older, own your home, and have paid off the mortgage or are close to paying it off, you’ll have accumulated equity in the property. This means you could do a reverse mortgage and tap into that home equity.

You also have options to purchase a new home with a reverse mortgage. There is a “Home Equity Conversion Mortgage (HECM) for Purchase” loan that allows people 62 and older to purchase a new principal residence with HECM loan proceeds. If you are in an area where housing prices are on the rise, you might be able to sell your home and move to an area that is less expensive. Or, for those who want to remain in their same town, a smaller home might help reduce expenses.

There are many uses for a reverse mortgage. Some include creating more cash flow for paying every day expenses, paying off high-interest credit card debt, more cash flow to invest in the retirement lifestyle you desire, investing in home improvements to make your home safer, and/or building a medical financial plan in case you need long-term healthcare. And we at Mortgage South want to help you see if a reverse mortgage can help you achieve retirement security. Mortgage South is local and you deal with a professional that has been doing these since their inception. Give Nathan a call, you will not be disappointed even if you find this is not a perfect fit, he can point you in a direction that might help. (423) 624-3878.