Reverse Mortgage Purchase Program – Widower Buys New Home
In an article January 29th, 2013 in the Wall Street Journal entitled, Reverse Mortgage Helps Client Buy a Home ., Jacob Levenson described how a recently widowed man in his mid 70’s was able to sell his Sacramento home and move closer to his family in San Francisco. “He owned his $250,000 home outright. But the median house price near his children was nearly $600,000.” The homeowner’s advisor “suggested the man sell some assets from his $600,000 portfolio. “He had a pension and Social Security and wasn’t relying on the portfolio for his living expenses.”
For this retired senior, this was not an attractive option. He had cared for his wife throughout her prolonged illness, and his desire was to retain his assets so if a similar situation presented itself, his children would not have to care for him. The adviser then offered the homeowner a solution. Secure a reverse mortgage and purchase a new home through the Reverse Mortgage purchase program. Under the HECM (Home Equity Conversion Mortgage) Purchase Program, the advisor’s client would be able to purchase a home and take out a reverse mortgage at the same time. In this way, the senior homeowner is able to keep their investments intact.
“Here’s how it worked. Mr. Hanson ran the numbers and saw that the client would easily be approved for a reverse mortgage. So the client sold his Sacramento home for $250,000 and made an offer on a new $600,000 house near his children. While the deal was closing, the man applied for and received a $350,000 reverse mortgage. At the closing, the house was completely paid for with the proceeds from his old home and the $350,000 from the approved reverse mortgage. His only remaining expenses were property taxes and insurance, and his only obligation was make the house his primary residence for six months. The bank would get its money back, plus interest, when he or his heirs sold it.”
“Using a reverse mortgage in this way allowed him to purchase a house that was of much greater value than the home he was living in, live near his grandkids and preserve his nest egg,” Mr. Hanson says.
The HECM Purchase program is wonderful program that can allow senior borrowers to buy a new home, possibly keep some money in the bank, and change their surroundings for the better.
http://online.wsj.com/article/SB10001424127887324329204578271800761424778.html?mod=googlenews_wsj
A REVERSE MORTGAGE – NON-RECOURSE LOAN
A Reverse Mortgage is a “non-recourse” loan which means the borrower can never owe more than the home is worth. The home is the collateral, the house stands for the debt. Mortgage insurance, which is required by the FHA on all Reverse Mortgages, protects borrowers from owing more than the value of the home. If the balance becomes higher than the value, the lender looks to the FHA for reimbursement based on the mortgage insurance paid throughout the life of the loan by the borrower. Your heirs are not personally responsible for the loan. The lender can only look to the sale of the property for repayment of the debt. If your heirs decide not to sell and keep the property, the full balance of the Reverse Mortgage will be due. Many of these heirs obtain their own mortgage, paying off the Reverse. If, at the time of your passing or moving out of your property, your reverse mortgage debt is higher than the value of the property (and of course an appraisal would have to be done), options for you or your heirs are a short sale or deed in lieu of foreclosure.
But remember, nothing is due the lender until the last surviving borrower passes away or permanently leaves the property. Any remaining equity is inherited by the heirs. Once again, if, upon selling the home, there is not enough to pay the lender, the lender will take a loss and will be reimbursed by FHA. This is why all FHA loans require mortgage insurance. It protects the borrower and the lender.
A Reverse Mortgage is a wonderful way to change your life, but as I have said before, the aren’t for everyone and they don’t always work for everyone. You must have enough equity in your home to do a Reverse Mortgage. And, something many people do not know: You can refinance your Reverse Mortgage over and over again as long as there is enough equity.
So look a that new home with bright possibilities. Be sure you can show the Reverse Mortgage lender that you can pay both insurance and taxes on the current and future home as this is a qualifition separate from the typical Reverse Mortgage where you refinance your existing home. There are going to be more stringent qualifications coming as lenders, FHA, and HUD are concerned about borrowers taking out a Reverse Mortgage but not being able to afford to pay the taxes and insurance on the home.
If you have questions, please give me a call. Kathie Adler – 631-804-9044 (cell phone). I am here to help.
Kathie Adler – Senior Reverse Mortgage Specialist, Advisors Mortgage Group, LLC, Kathie Adler is an MLO, Mortgage Loan Originator, approved to originate mortgages in New York and New Jersey. Advisors Mortgage Group, headquartered in Wall, New Jersey, is an A+ Better Business Bureau rated company, a multi-state mortgage broker with offices throughout the east coast.
Website address: www.ReverseMortgageLI.com
Kathie Adler can be reached by calling 888-843-9797 or 631-804-9044 or writing to reversemortgageli@yahoo.com
Kathie Adler - Reverse Mortgage Blog 
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