Buying a Home with Reverse Mortgage WAS a Great Deal
At the end of last year, I received notice of a couple surprising facts from the Department of Housing and Urban Development. The first was that a reverse mortgage could now be used to buy a home.
Prior to this notice, using the reverse mortgage as a means to refinance was the only option seniors had.
Now they can actually use the reverse like a forward mortgage. The difference being they don't make payments. Certainly a delight to many seniors.
The other part of the letter that was amazingly good, so good I had to read it three times to make sure I wasn't seeing things, was that the loan would be based upon value rather than sale price.
While the lender will take various things into account, the most important is the value of the house as determined by the appraisal.
The mortgagee letter stated basically the same thing for home purchases. What you should understand is home purchase mortgage loan to values are normally based upon the sale price or the appraised value, whichever is lower.
That makes more sense, doesnt it? It couldnt be as easy as simply based on home value.
Say the loan was just based on value alone. If that were so, and a senior discovers a steal of a house running at forty percent below and nabs it, at closing time, hypothetically the borrower would owe nothing.
The Dept. of Housing and Urban Development doesn't just give things away. They arent considered strict by any means, but they want to make sure that there is a down payment. The senior must give something in order to get something.
Wouldn't you know it; HUD has come around to this fact. The rule that was so good, is now gone. HUD reverted back to the conservative policy.
As a lender, I find it unusual how long it takes to get these Housing and Urban Development letters. I would expect them to have a myriad of attorneys checking these things up and down.
And yet, I received this just a couple of months before the change took place.
In summary, the official basis of the reverse loan, when used to buy a new home, will be the lesser of the price or value.
Prior to this notice, using the reverse mortgage as a means to refinance was the only option seniors had.
Now they can actually use the reverse like a forward mortgage. The difference being they don't make payments. Certainly a delight to many seniors.
The other part of the letter that was amazingly good, so good I had to read it three times to make sure I wasn't seeing things, was that the loan would be based upon value rather than sale price.
While the lender will take various things into account, the most important is the value of the house as determined by the appraisal.
The mortgagee letter stated basically the same thing for home purchases. What you should understand is home purchase mortgage loan to values are normally based upon the sale price or the appraised value, whichever is lower.
That makes more sense, doesnt it? It couldnt be as easy as simply based on home value.
Say the loan was just based on value alone. If that were so, and a senior discovers a steal of a house running at forty percent below and nabs it, at closing time, hypothetically the borrower would owe nothing.
The Dept. of Housing and Urban Development doesn't just give things away. They arent considered strict by any means, but they want to make sure that there is a down payment. The senior must give something in order to get something.
Wouldn't you know it; HUD has come around to this fact. The rule that was so good, is now gone. HUD reverted back to the conservative policy.
As a lender, I find it unusual how long it takes to get these Housing and Urban Development letters. I would expect them to have a myriad of attorneys checking these things up and down.
And yet, I received this just a couple of months before the change took place.
In summary, the official basis of the reverse loan, when used to buy a new home, will be the lesser of the price or value.
posted by Debt Consolidation Loan at
5:56 PM
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