Reverse Mortgages Now Available for Home Purchases ~No Income Qualifying, What’s Not to Love?
Realtors® and home buyers 62 years of age and older are excited about the no income qualifying reverse mortgage for purchase loan and how it expands home buying power, while at the same time, how it increases the ability for folks to keep more of a nest egg from the sale of an existing home. This is a mouthful, so let’s look at an example:
Karen and Jim are retired 76 year olds. They sold their large home in a metropolitan area; the cost of upkeep had become a burden and they discovered an area they wanted to move to that they loved and had a lower cost of living. (Sound familiar?)
Originally, the three of us discussed doing a traditional reverse mortgage on their existing home whereby we would set up a reverse mortgage line of credit and they would draw funds for upkeep expenses. Ultimately they decided to sell the home and their net proceeds were $550,000. They then moved into a rented a home in their new area.
Once settled they contacted a local Realtor® and mortgage broker who advised them the typical cost of a home with the amenities they wanted would be $400,000, but that under current, loan rules, their retirement income would not quality them a traditional loan. It looked like they were going to have to pay all cash for this next home and paying all cash would only have left them with $150,000 from the sale of their old home, not as large a nest egg as they had hoped.
However, instead of paying all cash they obtained a reverse mortgage for purchase loan. Here is how the formula worked: on a home valued at $400,000, and at age 76, they were eligible for a reverse mortgage of $224,000 and their down payment was $176,000. (A far cry from having to pay the all cash of amount of $400,000.) With their Realtor’s assistance they made an offer to purchase a home for $400,000, contingent upon typical items such as an appraisal, property inspections and obtaining a reverse mortgage for purchase loan. The sale went through successfully.
Therefore, with a reverse mortgage for purchase loan, instead of having to pay all cash, they only made a down payment of approximately 44%, $176,000, and the remaining 56% of the sales price became the reverse mortgage loan of $224,000.
They are monthly mortgage payment free.
THE BIG NEWS: instead of having a nest egg left over from the sale of their original home of $150,000 if they had paid, by doing the reverse mortgage for purchase, they instead have a nest egg remaining of $374,000.
The home is titled just as with any home with a mortgage: Karen and Jim are the owners and the home can be sold by them or their heirs, the reverse mortgage paid off, and they or their heirs keep any remaining equity.
This is an exciting loan program, please feel free to call me, or have your Realtor® call me, if you would like me to run a qualifying scenario for you. FHA is the insurer of reverse mortgages and HUD makes and enforces the program the rules. HUD advises that some form of income qualifying for ALL reverse mortgage types will be put into place by May of 2014, thus to be able to bypass this impending new requirement think about starting your traditional reverse mortgage, or for purchase reverse mortgage now.
Shawna McDonald, Loan Officer has completed hundreds reverse mortgages. Approved with 7 of the largest reverse mortgage lenders in the nation, she is an active listener who cares about her clients’ retirement goals. She can be reached at 530-497-3010. Her local office, Sierra Foothills Reverse Mortgage, is located at 412 E. Main Street Suite N, Grass Valley, CA. The website is www.SierraFoothillsReverse.com
NMLS #271335 BRE 00585530 Borba Investments, Auburn, CA NMLS #76801 HUD approved lender