Purchase Reverse Mortgages: Enjoying No Payments In 2009
Topics: home purchase, reverse mortgage purchase
Starting January 1, 2009, FHA will begin to insure reverse mortgage loans for purchases. What does this mean? Senior borrowers age 62 and over can now purchase a home using a reverse mortgage rather than a traditional forward mortgage.
This is great news to seniors who have had a desire to purchase a new home but felt they could not either due to their credit, their income, they did not want to have to start making payments again at this stage in their lives or a myriad of other reasons.
What does this really mean for senior borrowers? We have heard many senior borrowers who loved their homes and never wanted to leave it.
We have heard from almost as many who told us that they found their existing home just did not suit their needs any longer but they could not see any way of moving to a new home so they felt that they either had to remain in the home with which they no longer felt comfortable or their only other option was to sell it and rent an apartment somewhere and that option just was not very appealing to them.
The purchase reverse mortgage program allows borrowers to purchase a new home, they do not have to pay for the entire home with cash and they never have to make a mortgage payment for as long as they live in the property.
There is no income or credit qualification (other than HUD’s requirement that the borrower’s must be able to maintain their home and pay the taxes and insurance and cannot be delinquent on federal obligations or currently in bankruptcy) and the Home Equity Conversion Mortgage (HECM or HECK-um) for purchase can be used with all the same property types that the refinance HECM programs currently accommodate.
One thing that HUD did for seniors that will really help them in this market is that they are determining the down payment requirements solely on the appraised value, rather than the normal FHA method of the appraised value or the sales price, whichever is less.
This may not sound like much of a concession at first, but stop and think about a property which must be sold quickly in this market which still appraises for a higher value.
HUD is willing to allow the senior buyer to gain the benefit of the higher appraised value which may significantly, or in some cases even eliminate, the down payment requirement.
This allows borrowers who do not currently own an opportunity to purchase. It also gives current owners the chance to downsize, move into communities closer to friends, family and activities more in line with their needs or desires while keeping more of their proceeds from the sale of their existing home available for their use.
This is much more advantageous instead of having to buy their next home for all cash to avoid loan payments or qualification for a new mortgage with income they may not have. Remember, borrowers who purchase with a reverse mortgage never have to make a monthly mortgage payment for as long as they live in their home!
What are acceptable downpayment sources for the Reverse Mortgage Purchase Program?
1. Proceeds from sale of current home
2. Retirement Funds including 401k, Stocks, Bonds, etc
Now is the time for seniors who are serious about making a move to begin looking in earnest as they have a tool that has never been available to them before.
The Purchase Reverse Mortgage effective date is January 1, 2009 for FHA to begin to insure the loans but there is no reason seniors cannot begin to look now!
Michael G. Branson is a Mortgage Broker Licensed in several states who has over 31 years of mortgage banking experience.
www.allrmc.com 801-2762
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