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.
How this program is of use the the borrower is in the fact that the borrower is not required to make mortgage payment to the lender.
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. 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. Write a contract on the home
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. Reverse mortgage lender funds the remaining principal balance. Borrower will have a choice of financing closing costs or paying out of pocket for them.
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.
How this program is of use the the borrower is in the fact that the borrower is not required to make mortgage payment to the lender.
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. 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. Write a contract on the home
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. Reverse mortgage lender funds the remaining principal balance. Borrower will have a choice of financing closing costs or paying out of pocket for them.
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.
About the Author:
For more info on this subject go to Utilizing the Texas Reverse Mortgage to for a Home Purchase. Another great site is Public Knowledge Base for the Texas Reverse Mortgage. If you aren't in Texas, don't sweat it. The info is good everywhere.
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