The purchase Reverse Mortgage Program is designed to allow seniors to purchase a new home and never need to make monthly mortgage repayments for as long as they live in the home. The new reverse mortgage law that makes this possible took effect from January 1st 2009. The law requires that FHA will begin to insure reverse mortgage loans to be used for purchases.

What this in effect means for the senior borrower is that from January 1, 2009 they can purchase a home using a reverse mortgage instead of the traditional mortgage. So seniors who wanted to purchase a new home but who do not have good credit, a steady substantial income or were not comfortable with beginning to make monthly payments all over again at that period of their lives, can now easily do so with the already effective 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 suit their needs. Their options are usually only limited to remaining in the house in which they no longer feel comfortable or selling and then renting an apartment elsewhere which many people consider worse.

With the new purchase reverse mortgage loan program seniors do not have to cough out the full monetary value for their new home and would not have to make monthly repayments as long as they reside in the home. To qualify the senior has to above 62 and presently own a home. There is no income or credit criteria needed to qualify although must be able to maintain the new home and pay for relevant tax and insurance fees. So a senior with a home who requires another under this new program would apply for a purchase reverse mortgage loan and the FHA is expected to insure the loan. The value of the former home is appraised alongside the new home to ascertain if and how much initial down payment would be required and what balance from the sale would return to the senior.

An advantage of this new program is that the HUD appraises the former home by its actual appraised value and not by the FHA usual method of using the quick sale value. The quick sale value is the value of the property if it had to be disposed off very quickly. This value is usually considerable lower than the actual value of the home. With the new method, a senior may not even have to make any down payment for the new home. So seniors buying a new house will enjoy the benefit of the actual higher appraised value of their old property. This reduces considerable and sometimes completely eliminates the need to make a down payment for the new property. It also leaves the senior with more extra funds.

To benefit more from this new program, seniors may choose to downsize by moving into a smaller home or cheaper community closer to family and friends so as to eliminate the need to make any extra down payment and also leaves them with more extra proceeds from the sale of the old home for their personal use. The new program is even made more attractive when one considers that they would not have to make any monthly mortgage payments for as long as they reside in their new home.

The new Purchase Reverse Mortgage became effective in January 1, 2009 and since then the FHA began to insure reverse mortgage purchase loans. If you have a client that is a senior, who qualifies for this program and wishes to change or downsize their primary residence, now is the best time to begin looking around for your new home.


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Kathleen & Erin

Erin 925.918.0585