As of January 1, 2009 seniors, 62+, can purchase a home using a reverse mortgage. The reverse mortgage home purchase acts almost identically as a traditional forward mortgage home purchase. Acting similarly, the senior will bring in funds as a down payment from 25% to 55% of the value of the home. The mortgage company funds the balance of the loan.
This comes as a boon to some seniors as financial or credit restraints prohibit them from purchasing their next home. Now they can do so and are not obligated to make monthly payments the mortgage company.
Traditionally, the reverse mortgage acted as a safety net for seniors, allowing them to use the equity in their homes as a source of income to supplement their lifestyles. In return a reverse mortgage lender allows interest on borrowed moneys to accrue rather than being repaid to the lender on a monthly basis.
Eventually, when the home is sold voluntarily by the borrower, or the last surviving borrower passes away, the loan is paid back to the lender. The mortgage company makes money from the accumulation of interest over time. Those moneys are repaid to the lender when the home is sold.
These are the steps to the purchase program:
1. Borrower is to get a reverse mortgage approval letter from a HUD approved reverse mortgage lender. In conversation with the lender the senior will be advised as to the amount of funds necessary for down payment, closing costs, maximum purchase price, and reverse mortgage loan options.
2. Go home shopping and write contract based upon guidelines in the approval letter.
3. Borrower to bring closing funds as outlined in the approval letter. As stated this amount will be anywhere from twenty-five percent to fifty-five percent of the home value.
4. The lender then funds the remaining balance, which now becomes the reverse mortgage, eventually to be repaid (plus interest) at the time of death or sale.
5. Senior is now the new owner of the home.
6. The obligations to the mortgage are as follows: live in the home as primary residence, keep the property in reasonably habitable condition (per FHA guidelines) and pay property taxes and home owners insurance.
The new purchase program, beginning January 1, offers a whole new tool to the senior home buyer market. The jury will be out for some time, but my phone is already ringing. If that is any indication, it may become a staple to this market. - 15224
This comes as a boon to some seniors as financial or credit restraints prohibit them from purchasing their next home. Now they can do so and are not obligated to make monthly payments the mortgage company.
Traditionally, the reverse mortgage acted as a safety net for seniors, allowing them to use the equity in their homes as a source of income to supplement their lifestyles. In return a reverse mortgage lender allows interest on borrowed moneys to accrue rather than being repaid to the lender on a monthly basis.
Eventually, when the home is sold voluntarily by the borrower, or the last surviving borrower passes away, the loan is paid back to the lender. The mortgage company makes money from the accumulation of interest over time. Those moneys are repaid to the lender when the home is sold.
These are the steps to the purchase program:
1. Borrower is to get a reverse mortgage approval letter from a HUD approved reverse mortgage lender. In conversation with the lender the senior will be advised as to the amount of funds necessary for down payment, closing costs, maximum purchase price, and reverse mortgage loan options.
2. Go home shopping and write contract based upon guidelines in the approval letter.
3. Borrower to bring closing funds as outlined in the approval letter. As stated this amount will be anywhere from twenty-five percent to fifty-five percent of the home value.
4. The lender then funds the remaining balance, which now becomes the reverse mortgage, eventually to be repaid (plus interest) at the time of death or sale.
5. Senior is now the new owner of the home.
6. The obligations to the mortgage are as follows: live in the home as primary residence, keep the property in reasonably habitable condition (per FHA guidelines) and pay property taxes and home owners insurance.
The new purchase program, beginning January 1, offers a whole new tool to the senior home buyer market. The jury will be out for some time, but my phone is already ringing. If that is any indication, it may become a staple to this market. - 15224
About the Author:
Much more info about the reverse mortgage in Texas and everywhere else at The Quintessential Guide to the Reverse Mortgage in Texas. Everyday reverse mortgage queries answered at Purchasing a Home with a Texas Reverse Mortgage.
