Federal Housing Administration lenders are starting to see reverse mortgages for new home purchases in a new light following the current housing inventory shortage.
"While more than half of recent traditional home loans tracked by the Mortgage Bankers Association are purchase originations, less than 10% of the Home Equity Conversion Mortgages processed by ReverseVision's origination system get used by borrowers to buy a house," according to National Mortgage News.
"But now that the Federal Housing Administration and a bank that specializes in new-home and construction financing have come up with ways to address a timing concern that has held back the use of HECMs to purchase new construction, things could change."
FHA lenders believe that reverse mortgages for purchase could be quite useful on the new construction market.
"The HECM for Purchase, which allows seniors to take out a reverse mortgage on the property they are buying to pay for it, hasn't been as widely-used as it could be in the new construction market because the loans require a certificate of occupancy or equivalent," according to NMN.
"The requirement made it difficult for the borrower to get the funds in time to pay for the new home and the complication is off-putting to real estate agents."
Experts also believe that using reverse mortgage for purchase options for new home purchases could increase business for lenders and help borrowers get into a home in an expedient fashion.
To learn more about how FHA lenders could use HECMs for purchase for new home purchases, click on the image above.