HUD Allows Reverse Mortgage for Home Purchases
Borrowers, aged 62 and older, now have an additional financial tool to help them purchase that home they formerly thought was out of the budget. As of january 1, 2009 the government is allowing the reverse mortgage to be used the fund the purchase of a home, rather than just as a refinancing tool. The program works almost identically to any other home purchase with a mortgage. The borrower brings in adequate downpayment, and the mortgage company funds the loan.
Of course the benefit to the borrower is she can purchase a home and is not obligated to make mortgage payments for the rest of her time in the home.
In recent years, due to general need and national marketing by major financial institutions such as Wells Fargo and Bank of America the reverse mortgage has come into its own. Its major benefit to seniors is to allow the senior borrower to convert the equity in the home into cash to be used at the borrower's discretion.
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. Consult with an FHA approved reverse mortgage lender. In the discussion the lender will determine down payment requirements, purchase price limits, and various reverse mortgage options. The lender should furnish borrower with a letter of approval.
2. Write a contract on the home
3. The approval letter will roughly outline down payment and closing costs. The borrower deposits this amount with the title company.
4. At closing, the reverse mortgage company funds the remaining balance and closing costs if desired by the borrower.
5. Borrower takes ownership of the home.
6. The borrower is stipulated to live in the home and not use it as an investment property. The borrowers obligations are as follows: Pay taxes and home owners insurance, and keep property above FHA physical standards.
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.
Of course the benefit to the borrower is she can purchase a home and is not obligated to make mortgage payments for the rest of her time in the home.
In recent years, due to general need and national marketing by major financial institutions such as Wells Fargo and Bank of America the reverse mortgage has come into its own. Its major benefit to seniors is to allow the senior borrower to convert the equity in the home into cash to be used at the borrower's discretion.
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. Consult with an FHA approved reverse mortgage lender. In the discussion the lender will determine down payment requirements, purchase price limits, and various reverse mortgage options. The lender should furnish borrower with a letter of approval.
2. Write a contract on the home
3. The approval letter will roughly outline down payment and closing costs. The borrower deposits this amount with the title company.
4. At closing, the reverse mortgage company funds the remaining balance and closing costs if desired by the borrower.
5. Borrower takes ownership of the home.
6. The borrower is stipulated to live in the home and not use it as an investment property. The borrowers obligations are as follows: Pay taxes and home owners insurance, and keep property above FHA physical standards.
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.
About the Author:
Much more info about the reverse mortgage in Texas and everywhere else at The Quintessential Guide to the Texas Reverse Mortgage. Down and dirty questions answered at Texas Reverse Mortgage Public Knowledge Base and Guide.
posted by Credit Counseling at
6:10 PM
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