Purchasing a home in your retirement years is easier for older homeowners looking to move, downsize or upsize, with no house payments for the life of the loan.  Bill HR. 3221, has a provision for using reverse mortgages for a home purchase.

Government Updates

HUD just issued a mortgagee letter describing the guidelines on how to purchase a home with a government-insured reverse mortgage. Various lenders offer variable and fixed-rate HECM reverse mortgage programs. Your reverse mortgage advisor should discuss your goals and present the current program choices that are available to you.

How do your purchase with a reverse mortgage? How do they work? Homeowners or potential homeowners qualify for reverse mortgage proceeds based upon the youngest borrower’s age and the appraised value of the home. Home purchase with a reverse mortgage works the same.

For example, A 68-year-old borrower can purchase a $750k home with a down payment of $375k depending on the program chosen (programs vary with current interest rates, indices, variable or fixed loan programs) and have NO PAYMENTS for the life of the loan.

This is a powerful cash flow tool for older homeowners. HUD has issued some guidelines in their mortgagee letter. Given our recent history, these guidelines are in place to protect the borrowers, avoid fraud, abuses, and property flipping.

Here are some of the guidelines:

• Newly constructed homes must be completed and a Certificate of Occupancy must be issued prior to closing.
• Homeowners must occupy their purchased home within 60 days of closing.
• Lenders must verify funds prior to closing, closing funds can be from the sale of a previous residence.
• There can be no bridge loans or "gap" financing to meet the down payment or cash requirements of a reverse mortgage for purchase.
• Reverse Mortgage counseling is required for all potential borrowers.
• There is no three-day right of rescission period in a reverse mortgage for the purchase transaction.
• When closing no other liens against the property can exist.
• Any resale of a property may not occur 90 or fewer days from the last sale. Other provisions apply.
• The reverse mortgage is based upon the appraised value of the home

Reverse mortgages for purchase are another tool for older homeowners to improve their retirement lifestyle by putting more money in their pocket each month by potentially downsizing, moving closer to kids & eliminating burdensome home maintenance. Just as a family can outgrow a home and need more space, in your retirement years it may make more sense to move to lower maintenance, mature friendly home in size and floor plan. Reverse mortgages for purchase are an excellent idea and option for aging seniors and future boomers. If you have a reverse mortgage question, call Angella Conrard, Reverse Mortgage Advisor at 949-439-7030 or log onto www.angellaconrard.com .