7 Must-Read Reverse Mortgage for Purchase Resources

Studies show that many older adults want to age in place during retirement. But others who aren’t yet ready to put down roots may choose to relocate, downsize or even upgrade to a new home during their non-working years.

A reverse mortgage can help these older buyers in ways that few financial products can, and it’s important for loan originators to get this message across to the millions of retirement age adults currently living the U.S.

Reverse mortgages already need all the consumer outreach and education they can get. The same is true for the Home Equity Conversion Mortgage for Purchase (H4P), which let’s face it, suffers from even greater unfamiliarity than HECMs in general.

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If the average consumer isn’t familiar with reverse mortgages, or has enough understanding that a 60-second TV spot will allow, the chances are they don’t know you could actually buy a home using a reverse mortgage.

To assist lenders in their ongoing conversations with prospective borrowers about the merits of the HECM for Purchase product, RMD compiled a list of must-read articles to both reference and share with clients who could potentially benefit from an H4P:

5 Ways Reverse Mortgage Pros Can Grow Their H4P Business—As more Baby Boomers retire and become eligible for reverse mortgages, their desires to relocate later in life present a huge market opportunity for the H4P product. This article provides several ways reverse mortgage originators can position themselves to grow their H4P business, according to one reverse LO for whom H4P represents 80% of his business.

Baby Boomers’ Housing Needs May Pave the Way for H4P—Although the preferences of younger buyers will ultimately shape the future of the housing market, homebuilders and reverse mortgage originators alike must also pay attention to the housing needs of Baby Boomers and the challenges they face when buying a new home, according to a study from the National Association of Home Builders. This study, which was co-sponsored by a top-10 reverse mortgage lender, offers insight into the housing preferences of retirement age adults and how these buying trends could help influence their purchasing decisions.

Forbes: Benefits of Using Reverse Mortgages for Home Purchases—Reverse mortgages have many different uses that can accommodate a variety of personal needs, but one particular usage that is often overlooked by the general public is using these loans to purchase a new home, according to Forbes. Written by an esteemed retirement income expert, this article provides an accessible understanding of the practical use of a HECM for Purchase and its implications for retirement planning.

About.com Weighs the Benefits of HECM for Purchase—In this consumer-facing article on the H4P product, About.com tackles the subject of how to use a reverse mortgage to purchase a new home—a topic the consumer information site suggests has been left in the dark. The article is written by a financial planner and provides an objective view of HECMs and the H4P, including important considerations for prospective borrowers to think about when weighing the decision to get a reverse mortgage.

Seeking Alpha: H4P is Critical Alternative for Home Buying Retirees—A new home can be an expensive purchase, especially for retirees with limited liquid resources to fund this type of transaction. While most buyers generally have two options when it comes to buying a new home, SeekingAlpha suggests that a reverse mortgage can provide a critical third option for certain retirees. SeekingAlpha provides content that features stock market insights and financial analysis, including earnings transcripts, investment ideas, ETF and stock research written by finance experts. As such, SeekingAlpha targets the financially savvy reader, including Baby Boomers and other retirement age adults looking to expand their economic horizons.

Selling Home Builders on Reverse Mortgages, One H4P at a Time—Call a HECM for Purchase a “sleeping giant,” a vastly underutilized product—call it whatever you like. One full-service mortgage banker, however, is calling H4P the bulk of its reverse mortgage business. This article provides insight into one company’s strategy and successes in the HECM for Purchase market, including its partnerships with homebuilders specializing in age 55-plus housing.

Denver Post: H4P Sweetens the Deal for Retired Home Buyers—For older homeowners looking to buy the retirement home of their dreams, a reverse mortgage can help sweeten the deal through a HECM for Purchase, according to an article published by The Denver Post. Contributed to the Post by a reverse mortgage loan specialist, this article explains the practicality of using an H4P to buy a new home, while also dispelling a few common reverse mortgage myths in the process.

Written by Jason Oliva

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  • The articles were written in the first half of last year and most over 11 months ago. It is interesting that since that time, there has been no impact on H4P endorsements. For many of us that is the real test of the ability of articles to change the minds of over 33 million (10% of the US population) Baby Boomers now 62 years old.

    That is right since 1/1/2008 10% of the US population has turned 62. By 1/1/2027 at least another 12.5% of the US population will have turned 62 years old. On 1/1/2018, the first Baby Boomers will be 72, within one year of the average age of the youngest borrower for some time now. The day after the last Baby Boomers turn 62, the first Baby Boomers will turn 84.

    Never in the history of the US has this nation seen so much increase to those seniors who are over 62. Yet as that base grows, HECM endorsement number keep falling.

    HECMs for Purchase was still less than 5% of total endorsements and less than 2,400 endorsements for the fiscal year. The total H4Ps endorsed from 7/31/2008 to November 30, 2016 (the latest data from HUD), is just about 14,150. Worse, H4P endorsements for fiscal 2016 were 3.7% less than H4P endorsements for fiscal 2015.

    What does all of this mean? There is too much focus on H4Ps based on the their production and utility. Second, we need a lot more demographic characteristics when it comes to Baby Boomers. Before fiscal 2008, most of us in this industry professed a high degree of confidence that within just a few years after the first Baby Boomers turned 62, the total of our endorsements and proprietary reverse mortgage originations would be at all time highs, even in the 200,000 to 300,000 range. We were falsely concluding many traits about Baby Boomers that simply were not true.

  • Purchases will increase after HUD stops making the Buyer pay all the fees. When fees can be paid in the same manner as a Forward FHA mortgage, the program will make more sense. HUD’s working on that now … it’ll be interesting to see the modifications. I’m hoping Lenders and Sellers will be able to contribute. The 2.5% upfront premium is a killer – I’d love to be able to pay that fee.

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