Modular Home Financing: Cost of a FHA Reverse Mortgage
The Federal Housing Administration or FHA has developed a program called the FHA reverse mortgage that helps senior citizens own their home. This program was realized because seniors were selling their homes, buying smaller, more affordable homes and then taking out reverse mortgages on the new properties. That meant they were paying closing costs twice — first on the real estate closing, and a mortgage if they needed one to make the purchase, and then again when they switched to a reverse mortgage.
Modular Home
But now, the new FHA reverse mortgage for Purchase Program allows seniors to buy a home directly with a reverse mortgage — paying closing costs only once, says Bill Glavin, special assistant to the commissioner of the FHA. A sale of an existing home is not necessary and is not part of this transaction.
The new FHA reverse mortgage program allows using a reverse mortgage to buy a single-family home, a condo or a small multifamily residence, and allows them to convert some of the equity in their existing home to cash. They never have to make a single payment. Instead, they would collect monthly payments out of the equity on a tax-free basis as long as the home serves as their principal residence. If they did not sell their previous home, they could get additional income out of renting that property.
Under the plan, you can choose to take the money either in monthly payments, as a lump sum, a combination of the two or even in a line of credit that you can access whenever you need cash.
FHA Reverse Mortgage Costs
You can pay for most of the costs of a FHA reverse mortgage by financing them and having them paid from the proceeds of the loan. Financing the costs means that you do not have to pay for them out of your pocket. On the other hand, financing the costs reduces the net loan amount available to you.
The FHA reverse mortgage includes several fees and charges, which includes: 1) mortgage insurance premiums 2) third party charges 3) origination fee 4) interest and 5) servicing fees. The lender will discuss which fees and charges are mandatory.
Mortgage Insurance Premium
You will incur a cost for FHA mortgage insurance. The mortgage insurance guarantees that you will receive expected loan advances. You can finance the mortgage insurance premium as part of your loan.
You will be charged an initial mortgage insurance premium at closing. The initial MIP will be .5 percent or 2.5 percent, depending on your disbursements. Over the life of the loan, you will be charged an annual MIP that equals 1.25% of the mortgage balance.
Third Party Charges
Closing costs from third parties can include an appraisal, title search and insurance, surveys, inspections, recording fees, mortgage taxes, credit checks and other fees.
Origination Fee
You will pay an origination fee to compensate the lender for processing your FHA reverse mortgage. A lender can charge a HECM origination fee up to $2,500 if your home is valued at less than $125,000. If your home is valued at more than $125,000 lenders can charge 2% of the first $200,000 of your home’s value plus 1% of the amount over $200,000. HECM origination fees are capped at $6,000.
Servicing Fee
Lenders or their agents provide servicing throughout the life of the FHA reverse mortgage. Servicing includes sending you account statements, disbursing loan proceeds and making certain that you keep up with loan requirements such as paying real estate taxes and hazard insurance premium. Lenders may charge a monthly servicing fee of no more than $30 if the loan has an annually adjusting interest rate and $35 if the interest rate adjusts monthly. At loan origination, the lender sets aside the servicing fee and deducts the fee from your available funds. Each month the monthly servicing fee is added to your loan balance. Lenders may also choose to include the servicing fee in the mortgage interest rate.
In case you still have question about modular homes, you may contact Legendary Homes Inc in Jackson, Michigan. A representative will be happy to assist you. Meanwhile you can check our modular home price sheets by signing up to our blog
