Using a Reverse Mortgage to Buy a Home

One of the biggest growth markets in America are Senior citizens, including Baby Boomers who are starting to turn 60 now.  According to Senior Journal, 81% of Americans age 65+ own their own home. This equates to about 29 million people!! Even divided by 2 is a bunch!! This is a market that will continue to grow. If you do not have a plan to grow your business with it you will be missing the boat.

Many will be downsizing over the next 30 years and will face challenges due to a lack of any of the following normal mortgage requirements: employment, income, assets or credit. Many of these same seniors are sitting on a wealth of equity in their current homes.

Not only can a Reverse Mortgage help seniors stay in their home, it can also help many of them purchase their retirement home. (Or in some cases a vacation home). 

According to Fannie Mae, the Key Features of their Homekeeper program for the purchase of a property are:

• "No borrower income limits and no credit requirements mean you may qualify for a higher-priced home. Loan qualification is based on your age and the value of the home you want to buy.
• You can lower your down payment and keep more of your cash by choosing to use all or part of the loan proceeds toward your home purchase.
• Repayment is not due as long as you occupy the home.
• There are no monthly payments.
• Your loan funds do not affect Social Security or Medicare benefits. (If you receive Supplemental Security Income or Medicaid, these benefits may be affected.)
• You do not pay back the loan until you sell your home, no longer use it for your primary residence, or pass away. Then, you or your estate will repay the cash you received from the Home Keeper for Home Purchase mortgage, plus interest and other finance charges, to the lender. This means that any remaining equity in your home can be passed on to your heirs through the sale of the property.
• You will never owe more than the value of the home at the time of repayment, even if the loan balance exceeds the value of your property. This means no debt will ever be passed along to your estate or your heirs.
• At loan application, you must verify that you have the required funds for a down payment. This money can come from your savings, investments, or the sale of your current home.
• At the loan closing, you will need to show that you have title insurance and that a title search has been performed.
• The amount of money you get from a Home Keeper for Home Purchase loan depends on your age, the number of borrowers and the appraised value of your home.
• You must keep applicable taxes and hazard insurance current, as well as maintain your home in good repair. The loan may become due and payable if you fail to pay property taxes and insurance or if you do not maintain your property.
• You must attend reverse mortgage counseling that explains your Home Keeper for Home Purchase financing options. "

There are several types of Reverse Mortgages. Fannie Mae's Homekepper is just one of them.

An example of how this could work:

John and Betty Simons are 80 years old. They own their home free and clear. They have decided that they need to downsize and are looking at a small home in a Senior community for $250,000. Their Realtor has indicated that she could sell their current home for $350,000. After closing costs and Realtor fees, the Simon's would net around $320,000. While they could pay their new home off free and clear, this would leave them with only $70,000 to supplement their retirement.

With a Homekeeper Reverse Mortgage, they would make a downpayment of $131,000 and finance the additional $119,000. They would make no payments on the new loan until they sold or both moved out. They would have $189,000 available to place in a conservative, interest bearing account to supplement their income.

This is another great program that should be in every realtor's tool box.

If you or anyone you know needs help with a Reverse Mortgage, feel free to contact me.

Larry Morris is a loan Officer with Equipoint Financial Network in Newberg, Oregon. He specializes in relocations and Sherwood, Oregon neighborhoods and Yamhill COunty. He is a Board Member of the Sherwood Chamber of Commerce. He can be reached at larry.morris@equipoint.com . His website is http://www.pdx-mortgage.com/. This material is copy protected 2007 by Larry Morris, Mortgage News that Matters. All Rights Reserved His opinions do not necessarily represent the views of Equipoint Financial Network.

Licensed in: OR, WA, AL, AK, AZ, CA, CO, CT, FL, GA, HI, ID, IL, IN, IA, MD, MA, MI, MS, MO, MT, NE, NV, NH, NM, OK, SC, SD, TN, TX, UT, VT, VA,