Reverse Mortgage for Purchase
FAQs
I thought reverse mortgages were only used to refinance my current house, not buy a new home?
You can now use a reverse mortgage to move, or stay in your current house.
What are the advantages of using a reverse mortgage to downsize and move to a new home?
There are NO PAYMENTS when you use a reverse mortgage for a new home.There are no credit or income requirements or pre-payment penalties that come with traditional forward mortgage. Sophisticated seniors are using them to stay liquid when they downsize.
Do you need to sell your current property before you use a reverse mortgage to finance a new home?
No, not necessarily, but your new home must be your primary residence and you must move within 60 days after closing.
What does it take to qualify to use a reverse mortgage to finance a new property?
The loan amount is based upon your age and the lesser of the appraised value or sales price. It must be your primary residence. Gifts, loan discounts, builder incentives from the seller or any other party are prohibited by FHA.
What are the costs?
The new law that went in to effect in the fall of 2008 imposes a $6,000 cap on origination fees. Lenders can charge 2 percent of the first $200,000 of the loan's value, plus 1 percent of any additional loan value. FHA insurance, which protects consumers against values dropping and lender failure, is charged at 2 percent.
Is there a credit line to access like other reverse mortgages?
Yes, if you choose not to use all of the reverse mortgages funds toward the purchase of your new home. Even if you do use all of the funds, you will have a credit line as your home appreciates in value.
How should I compare all of my options on financing a new home: "cash down," "traditional mortgage," and "reverse mortgage for moving?"
The best way to think through your choices is by asking yourself how much money you have and need, how much money you can afford to have invested in your house, and whether or not you can afford monthly loan payments.
Who owns the house?
You own the house. The title is in your name.
