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.
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.
This is how the reverse mortgage purchase program works:
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. At closing the borrower will be required to make a down payment between 25% to 55% of the value of the home.
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. Borrower lives in home as a primary residence. The borrower is then only obligated to pay property taxes and homeowners insurance until death or sale of property.
In the near future the typical reverse mortgage candidate will continue to be one in need of funds to relieve financial stress. The reverse mortgage purchase, however, will cater to a certain profile and offer a viable financial tool.
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.
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.
This is how the reverse mortgage purchase program works:
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. At closing the borrower will be required to make a down payment between 25% to 55% of the value of the home.
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. Borrower lives in home as a primary residence. The borrower is then only obligated to pay property taxes and homeowners insurance until death or sale of property.
In the near future the typical reverse mortgage candidate will continue to be one in need of funds to relieve financial stress. The reverse mortgage purchase, however, will cater to a certain profile and offer a viable financial tool.
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 Everything You Need to Know About the Reverse Mortgage in Texas.
posted by Credit Counseling at
6:36 PM
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