Connecticut Reverse Mortgages and Home Purchases

A Reverse Mortgage (HECM) can be used to Purchase a Home. Many people want to remain homeowners but want to downsize to a smaller home. If mobility is an issue they may want a home on one floor. Frequently people over age 62 have a lot of equity in their current home and a home equity conversion mortgage (HECM) commonly known as a reverse mortgage may be a good option. There are two ways that this can be done:

• Buy with a standard mortgage and then repay the standard mortgage with the reverse mortgage.

• Sell the current home, use cash from the sale to purchase the new home  and then do a reverse mortgage to withdraw a portion of the equity.

If you can qualify for a standard mortgage, you can use that to buy your home and then take out a reverse mortgage to pay off the standard mortgage and end up with no mortgage payments. You may also have cash left over for other purposes depending on your equity and the current HUD draw limits (see below). One drawback to this approach is that you will have two sets of closing costs.

In many cases elder citizens do not have the income to qualify for a standard mortgage. In this case they can sell their current home and use the cash to buy their new home. They can than immediately do a reverse mortgage and use the equity up to the HUD draw limits for other purposes.

There is a third approach and it is not necessary to be a current homeowner to do this. You can buy a home and take out a reverse mortgage at the same time using the HECM for Purchase program initiated by Congress in 2008. However, you must have the cash to pay the difference between the maximum draw limit established by HUD and the sales price plus closing costs. Once the loan closes you can withdraw any amount of equity up to the HUD draw limit.

For more on reverse mortgages including principal limit factors that determine how much money you are eligible for (draw limits), use the following Housing and Urban Development (HUD) link:

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecmhomelenders

The above is a quick summation of ways to use reverse mortgages. There are many other factors not covered in this summary.

For further information contact me by phone, text or email: Dale Athanas, Loan Officer, NMLS# 1065087, Northeast Financial Mortgage, 860-876-0466, dale@daleathanas.com