Seniors, sixty two and older, now have the option of purchasing their next home with a reverse mortgage. In fact, the reverse mortgage acts similarly to a traditional forward mortgage in this capacity. The borrower makes an adequate down payment, and the reverse mortgage lender funds the remaining balance, just as a forward lender would.
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.
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.
Reverse mortgage lenders make money from the accrual of interest over time. When the last surviving spouse dies or the borrower chooses to sell the property, the original loan plus accrued interest is repaid to the bank.
These are the steps to the purchase program:
1. Contact a reputable FHA approved reverse mortgage company. The borrower will be advised as to how much money will be necessary for the down payment. Additionally, closing costsm, purchase price limits and various loan programs will be discussed.
2. Go home shopping and write contract based upon guidelines in the approval letter.
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 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.
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.
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.
Reverse mortgage lenders make money from the accrual of interest over time. When the last surviving spouse dies or the borrower chooses to sell the property, the original loan plus accrued interest is repaid to the bank.
These are the steps to the purchase program:
1. Contact a reputable FHA approved reverse mortgage company. The borrower will be advised as to how much money will be necessary for the down payment. Additionally, closing costsm, purchase price limits and various loan programs will be discussed.
2. Go home shopping and write contract based upon guidelines in the approval letter.
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 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:
To learn more about purchasing a home with a reverse mortgage go to The Quintessential Guide to the Reverse Mortgage in Texas. Everyday reverse mortgage queries answered at Texas Reverse Mortgage Public Knowledge Base and Guide.
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