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Thursday, December 22, 2011

FHA Approval of Condos Has Other Ramifications (Long Comment from Don Opeka)

Don Opeka of Orion Mortgage sent me this email, which is too long for a comment, so I'm posting it:

Historically, many agents and borrowers think of FHA approval as being important only for low down payment, first time buyers.  FHA approval is also important for high end properties because most Reverse Mortgages today are FHA insured.  If a property owner owes little or nothing on the property, and they are older than 62, they may want to eliminate their mortgage payment (they still have to pay for taxes, insurance and maintenance), or take cash out without a payment.  For people who have equity in an expensive home, a Reverse Mortgage for purchase may be an answer for buying a condo when there isn't enough equity to pay cash for the condo.  If the condo isn't FHA approved, a Reverse Mortgage won't be available.

I've already had this occur.  The owner of a high end condo, one that would not normally be purchased with an FHA loan, came to me and needed a Reverse Mortgage to stay in the home.  The condo was not FHA approved, so I could not offer a Reverse Mortgage.

Reverse Mortgages are also useful for moves that become necessary for health or other reasons.  A person may have a home that's free and clear, but need one level living instead of multi-level living.  The costs of the move can be covered with a Reverse Mortgage instead of withdrawal of retirement savings, or a move to a less expensive home.

I'm happy to separate the myths and facts of Reverse Mortgages.  Both young and old should understand how they really work.

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