Recent Reverse Mortgage Rule Helps Seniors Purchase New Homes

A new Purchase Reverse Mortgage Program was recently announced. It is designed to help seniors purchase a new home and never make monthly mortgage repayments for as long as they live in the home. The new reverse mortgage law that makes this possible took effect in January 2009. The law requires that FHA insure reverse mortgage loans to be used for these purchases.

A senior, 62 or older, can purchase a home using a reverse mortgage instead of the traditional mortgage. Seniors who wanted to purchase a new home with poor credit, or without a steady substantial income or who are not comfortable with beginning to make monthly payments all over again, can now easily do so with the reverse mortgage purchase loan.

Traditional reverse mortgage loans are meant to allow seniors above 62 to receive a steady income from their home equity. It affords a senior who is comfortable with his present home to remain in it and still access steady income. However there are many seniors who are not comfortable with their present home as it no longer suits their needs. Their options are usually limited to remaining in the house in which they no longer feel comfortable or selling and renting an apartment elsewhere… which many people consider worse.

With the new purchase reverse mortgage loan program seniors do not have to cough up the full monetary value for their new home and do not have to make monthly repayments as long as they reside in the home. To qualify, the senior has to be 62 or older, and presently own a home. There is no income or credit criteria needed to qualify although the senior must be able to maintain the new home and pay for relevant tax and insurance fees.

The senior with a home who desires another home under this new program would apply for a purchase reverse mortgage loan. The FHA is expected to insure the loan. The value of the former home is appraised along with the new home to ascertain if, and how much, initial down payment would be required. In some instances a balance from the sale could actually be returned to the senior.

One advantage to this new program is that HUD appraises the former home at its actual appraised value. The appraisal is not made by the FHA which is the usual method of using the quick sale value. The FHA “quick sale” value is the value of the property if it had to be disposed off in a fire sale situation. This value is usually considerable lower than the actual value of the home.

With the new appraisal method, a senior may not have to make any down payment for the new home. Seniors buying a new house will enjoy the benefit of the actual higher appraised value of their old property. This reduces and may eliminate the need to make a down payment for the new property. It also leaves the senior with more extra funds.

Seniors may choose to downsize by moving into a smaller home or smaller community closer to family and friends and to eliminate the need to make any extra down payment and also leaves them with additional proceeds from the sale of their old home for their own personal use. The new program is more attractive as seniors do not have to make any mortgage payments for as long as they live in their new home.

If you are interested in learning more about this new program, contact Paul Neufeld at www.pwneufeld.com