Secondary Financing for 60+ FHA Borrowers

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It is not a widely known fact that FHA allows (with advance approval) prospective borrowers that are 60 years of age or older to borrow the required funds to close for the purchase of a principal residence.  Of course, there are some strings attached but this little-known fact may be history once HUD/FHA implements its updated Origination through Endorsement Handbook targeted for June 15, 2015.

In order to comply with current FHA underwriting requirements, the provider of the borrower’s secondary financing must be a relative, a close friend with a clearly defined interest in the borrower, the borrower’s employer or an institution established for humanitarian or welfare purposes.

The provider of this secondary financing must not have an identity-of-interest in the sale of the property (i.e. builder or seller) and the principal amount of the loan cannot exceed 100% of the value, plus prepaid expenses.  Also, the Note cannot bear an interest rate exceeding the interest rate on the insured mortgage.

So, if you are a baby boomer (over 60 years old) and lack the funds deemed necessary to complete a home purchase, one option available for you is to borrow such funds in accordance with the requirements outlined above and to seek FHA financing. You better hurry; as this option looks like it will be terminated if HUD’s draft 4000.1 Handbook is implemented as planned on June 15, 2015.

If you are a lender – chances are that you are not fully aware of this option for senior home purchasers that is offered by FHA.  Looks like you still have a few more months, however, to take advantage of this option.

About the Author

Gerry Glavey

Gerard (Gerry) Glavey is Senior Vice President / Chief Credit Officer for LoanLogics. Gerry has decades of experience working in residential mortgage credit and compliance and brings insights that few in the industry can match. In his role, he develops new services and provides support for all post close quality control and quality assurance, pre-close quality control, due diligence services, and document processing services. He spent 37 years with the US Department of Housing and Urban Development, where most recently he was the Director, Processing and Underwriting Division for the Home Ownership Center (HOC) in Philadelphia. In this capacity, Mr. Glavey was responsible for the administration of all HUD/FHA Single Family Loan Origination activities, including underwriting, appraisal and endorsement for the 16 state jurisdiction of this HOC.