Welcome to the RolandoGill.com Blog

2010-10-17 12:04:58
Reverse Mortgage Rules Change to Allow Seniors to

Reverse Mortgage Rules Change to Allow Seniors to Buy a New Home

Purchase Reverse Mortgage Program allows seniors to purchase a new home, never make a mortgage payment for as long as they live in the home, may require sizable down payment.  

Nov. 14, 2008 - Starting January 1, 2009, FHA will begin to insure reverse mortgage loans for purchases.  What does this mean?  Senior borrowers age 62 and over can now purchase a home using a reverse mortgage rather than a traditional forward mortgage. This is great news to seniors who have had a desire to purchase a new home but felt they could not either due to their credit, their income, they did not want to have to start making payments again at this stage in their lives or a myriad of other reasons. 

 What does this really mean for senior borrowers? 



We have heard many senior borrowers who loved their homes and never wanted to leave it.  We have heard from almost as many who told us that they found their existing home just did not suit their needs any longer, but they could not see any way of moving to a new home.

So, they felt that they either had to remain in the home with which they no longer felt comfortable or their only other option was to sell it and rent an apartment somewhere and that option just was not very appealing to them. 

The purchase reverse mortgage program allows borrowers to purchase a new home, they do not have to pay for the entire home with cash and they never have to make a mortgage payment for as long as they live in the property. 

There is no income or credit qualification (other than HUD’s requirement that  the borrower’s must be able to maintain their home and pay the taxes and insurance and cannot be delinquent on federal obligations or currently in bankruptcy) and the Home Equity Conversion Mortgage (HECM or “HECK-um”) for purchase can be used with all the same property types that the refinance HECM programs currently accommodate.

One thing that HUD did for seniors that will really help them in this market is that they are determining the down payment requirements solely on the appraised value, rather than the normal FHA method of the appraised value or the sales price, whichever is less.  This may not sound like much of a concession at first, but stop and think about a property which must be sold quickly in this market which still appraises for a higher value. 

HUD is willing to allow the senior buyer to gain the benefit of the higher appraised value which may significantly, or in some cases even eliminate, the down payment requirement.  This leaves more of the senior’s funds available to the senior as disposable assets.  What follows below are some HECM purchase examples illustrating this point:

 ● 67 Year Old Buyer – 5% Expected Average Interest Rate


Home Purchase

Example #1

Example #2

Appraised Value



Sales Price



Principle Limit



Minus Insurances & Fees



Available Proceeds



Required Down Payment



(example taken from HUD Mortgagee Letter 2008-33) Notice the borrower has to come in with less money when the value of the property is higher than the sales price (example #2).  Now let’s give two more examples and show what happens when the borrower is a little bit older and they get even a little better deal on the home:

● 79 Year Old Borrower Today’s Expected Rate of 5.57%


Example #3


Appraised Value


Sales Price


Principle Limit


Minus Insurances & Fees


Required Down Payment


● 85 Year Old Borrower Today’s Expected Rate of 5.57%


Example #4


Appraised Value


Sales Price


Principle Limit


Minus Insurances & Fees


Required Down Payment


As you can see by the last two examples, the older the borrower and the better deal the borrower can get when purchasing the home, the less out of pocket the borrower needs to close the transaction.  We have actually seen examples where the appraised value was significantly higher than the sales price due to distressed sales and borrowers had a zero down payment requirement. 

This allows borrowers who do not currently own an opportunity to purchase.  It also gives current owners the chance to downsize, move into communities closer to friends, family and activities more in line with their needs or desires while keeping more of their proceeds from the sale of their existing home available for their use. 

This is much more advantageous instead of having to buy their next home for all cash to avoid loan payments or qualification for a new mortgage with income they may not have.  Remember, borrowers who purchase with a reverse mortgage never have to make a monthly mortgage payment for as long as they live in their home!  

What are acceptable down payment sources for the Reverse Mortgage Purchase Program?

  ● Proceeds from sale of current home.  

  ● Retirement Funds including 401k, Stocks, Bonds, etc

  ● Other Savings

Now is the time for seniors who are serious about making a move to begin looking in earnest as they have a tool that has never been available to them before.  The Purchase Reverse Mortgage effective date is January 1, 2009 for FHA to begin to insure the loans but there is no reason seniors cannot begin to look now!

To search Salt Lake Townhomes, click here.

To search St. George Townhomes, click here.

Email me any questions at gilrol@gmail.com
Call and ask any questions, no obligation.

You can also call or email to register for our free one hour information seminar.  No obligation, leave your checkbook at home.  Call for dates and times.  

Rolando Gill
Everest Realty - 801-694-9955

Blog Archive
2016-12-29 10:19:05
Should I call the number on the sign?

2011-06-09 11:34:30
Stats - 25% short sales 6/9/2011

2011-06-04 06:29:24
For Sale by Owner or Hire an Agent

2011-06-02 08:46:29
Stats - Sales, sales and more sales 5/31/11

2011-05-12 12:36:51
First Spring numbers, more homes sold 5/12/2011

2011-04-30 07:32:34
Cheaper to buy than to Rent

2011-04-26 12:17:34
Stats - Short sales on the rise 4/26/11

2011-04-21 13:31:04
Dave Ramsey says 'Use an Agent!'

2011-04-20 20:36:01
Protect and Defend the Mortgage Interest Deduction

2011-04-19 12:00:01
#1 Barrier to Home Ownership

2011-04-18 13:13:34
Happy Tax Day

2011-04-15 07:24:36
Utah #4 in Foreclosures

2011-04-14 14:46:26
Regulators Regulators Regulators

2011-04-13 09:51:27
Stats - Seasonal bump in sales 4/13/11

2011-04-12 08:53:51
Protecting the American Dream. I am in!

2011-03-29 10:09:17
Why Would My Lender Accept Less Than Is Owed?

2011-03-22 08:51:20
Stats - 6600 homes for sale, only 639 sold 3/15/11

2011-03-11 11:10:49
Stats - 1700 New Short Sales Listed 3/11/11

2011-03-01 08:35:41
Sales in Salt Lake County are increasing

2011-02-16 16:19:29
Stats - The year of the Short Sale 2/16/2011

2011-02-09 11:12:27
Stats - 50 per cent Fail 2/9/2011

2011-02-08 06:50:49
Median Shmedian 2/8/2011

2011-02-04 08:57:58
Shadow Inventory 2/4/2011

2011-02-02 15:15:43
Stats so you can sound smart. 2/1/2011

2011-01-27 17:54:30
The Basics of Buying a Home

Click here to see ALL articles.

Comment on this Article

Your Name:
Your Email:
Verify:  Please enter the numbers shown to help eliminate spam.

Take us Along
All Home Listings in your Pocket!

What's Your Home Worth?
Find out where you stand in your market.

Google® Map Search
Use Google® Maps to find your next home.