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As of 1/1/2009, seniors age 62 and older can use a federally insured Reverse Mortgage to purchase a home. Under the same HECM program that is being used by many seniors to access the cash equity in their home, seniors now have another tool to use when they look at purchasing a new home.

The FHA insured HECM is a huge improvement to the old Fannie Mae Homekeeper that could be used to purchase a home.

As it currently stands, a senior looking to purchase a home would either have to pay cash or qualify for a mortgage based on their fixed income. For many, this would liquidate their savings or prevent them from buying a home that they felt comfortable living in.

With the new program, a senior could either purchase more home without having a monthly mortgage payment, or free up a significant amount of their cash to live on or invest elsewhere.

While we don't know all of the details, we can assume that the lending limits for purchases will be similar to the limits for refinances. If so, here are some examples of what you could expect:

A 62 year old borrower could purchase a $250,000 home with an approximate down payment of $120,000. There would be a lien against the property, but there would be no monthly mortgage payment. As with a reverse mortgage used for a refinance, the loan, plus interest would be due and payable upon death or 1 year after moving out of the property.

If this same borrower was 75, the $250,000 home would require a down payment of approximately $90,000.

Look for more details here as the dust settles. Technically, we can't even take an application until 1/1/09, so I don't have a calculator that will give me more exact figures.

That said, if you are a senior, and looking at purchasing a home next year, you should at least consider using a Reverse Mortgage.

Call me, Larry, if you have any questions. 503-421-0096

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