Purchasing with a Reverse Mortgage

Purchasing with a Reverse Mortgage
By Steve Meyers
August 22nd, 2014

Most of my clients are to young to utilize the option of a Reverse Mortgage but you may have parents or acquaintances who would qualify for this type of program. If so, pass this article along.

A Reverse Mortgage is a Home Equity Conversion Mortgage (HECM). It allows someone over 62 years old to purchase a home using a mortgage that does not require monthly payments to pay down or pay off the loan. Instead, the interest is added back onto the principal balance until the home is sold in the future. If the mortgage balance is higher than the sales price at the time of sale, the homeowner is not obligated to repay the amount above the sales price.

To qualify for a Reverse Mortgage;
a.) The borrower(s), and non-borrowing spouse, must be 62 years old.

b.) The home must be occupied by the borrowers within 60 days of “Closing”.

c.) The borrowers must properly maintain the property.

d.) The property must be a single-family home or a building of 2 to 4 units.

e.) The borrowers must pay the real estate taxes, hazard and flood insurance, Homeowners Association Dues, if any.

The available loan amount is determined by;
1.) The age of the youngest borrower or non-borrowing spouse.

2.) The current mortgage interest rate.

3.) The lesser of the; purchase price, appraised value or, FHA maximum lending limit.

4.) Initial mortgage insurance program.

What questions should you ask yourself;
i.) Will this home accommodate our long term needs? Are there steps in the home that we may find difficult to climb in 10+ years? Are we capable of personally maintaining the home in the future or, are we willing to pay for the maintenance services when we’re unable to maintain the home?

ii.) Will we be able to pay the real estate taxes, insurance, and upkeep in the future?

If you have any comments or questions about this article, please email me at smeyers@kw.com.
If you would like to read other real estate articles I’ve written and published on-line, go to;

http://www.ourseattlehome.wordpress.com

Steve Meyers is a Managing Broker at Keller Williams Real Estate in Seattle, Washington. He can be reached at (206) 972-3328 or smeyers@kw.com.

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