What is a Reverse for Purchase?
A Reverse Mortgage is a financial tool that was created specifically for homeowners age 55 or older, and in addition to the more popular refinance, includes the possibility of purchasing a home as well. If you are a cash buyer, or have access to a significant down payment, consider increasing your purchasing power with a Reverse for Purchase.
The Reverse for Purchase (R4P) allows Seniors and those 55+ to purchase a home without the burden of a monthly principal and interest (P&I) payment, and without that burden, financial qualifications are more lax:
- Some borrowers will qualify with no FICO score; This is the FHA-insured Home Equity Conversion Mortgage which will require a financial assessment. A Lender’s proprietary Reverse Mortgage requires a minimum 640 FICO score. Therefore, Buyers who can’t qualify for a traditional mortgage due to credit history can indeed qualify for a R4P.
- Borrower’s income is not based on required loan payments or debt-to-income ratios, but based on standardized needs – averaging $1000/mo per borrower, so this is a great option for those of us on limited income.
With a R4P, it is now possible to purchase a home that better suits our changing needs and lifestyle – you can purchase a home that better meets your physical needs, finally move closer to family, or simply increase your purchasing power.
- No more required monthly mortgage payments (still responsible for property taxes and insurance)
- Minimal income requirements
- Financial assessment can replace FICO score
- Loan amounts up to $4,000,000
- A down payment based on youngest borrowers age
- Fixed rate options
- Adjustable-rate options
Traditional Mortgage vs. Reverse Mortgage
Janis’s Story:
After selling her home, Janis, 65, was in the market to buy something closer to her grandchildren, a place that would be fun to visit, and a home that she could live in for the rest of her life. Although the total proceeds from her sale made a generous down payment, her retirement income would not qualify her for a traditional loan. Looking at various options with her children, Janis realized she did not want to move in with them—and to be fair, they did not want her to live with them either! Once the laughter subsided, they realized her situation called for a Reverse for Purchase. She pays her homeowners insurance annually and property taxes twice a year – and never a mortgage payment. Janis now lives in a 3BR/3BA with a downstairs bedroom and ensuite bath, generous upgraded kitchen, and is 32 steps away from the community pool and hot tub. She hosts Christmas every other year and takes in all her teenage grandchildren for two weeks in the summer. Janis is living the life she hoped for.
Janis’s two adult children were not expecting any cash inheritance, they just wanted their mom to live her best life. Because Janis was so young at the time of her purchase, it was likely the loan amount would eventually exceed the home’s value. Janis’s Reverse Mortgage – just like all Reverse Mortgages at Bless This Address, Inc. – are “non-recourse,” which means her heirs will never owe more than the market value of the home: No matter what the loan amount, they will hand the keys to the Lender and walk away… knowing their mom created amazing memories and supported enduring relationships for her family.
Peggy’s Story:
Peggy, 62, bought her 3BR/2BA house 20 years ago. She recently retired and couldn’t let 70% of her retirement go toward an over-sized, high-maintenance property anymore. Never married with no children, she just wanted to downsize into something with no weeds to pull so she could continue her passion of beading and making jewelry. Initially, she was prepared to make much smaller mortgage payments – but once she learned about a R4P and how it eliminated a required monthly payment, Peggy was fervent about using a R4P. She even attended the required 3rd party counseling before she even found a property. Her purchase transaction was a standard 30-day escrow and although the Seller’s Agent was dubious at first, by Close of Escrow he was wishing he was old enough to have a R4P himself.
Peggy bought the perfect, cozy 1BR home. The large den would become her art studio. Peggy had enough cash remaining to brick over the small backyard lawn and treat herself to luxurious patio furniture for wine with friends – to watch the HOA grounds keepers do the weed maintenance for her. Peggy recently got her first Passport and is planning a two-week European wine tour with friends. “They’ve been going for a few years now, and I can finally join them!! Thank you so much for this life.”