How to Use a Reverse For Purchase When a Refinance Won\\\'t Work

Lack of Equity is a problem for many seeking to refinance, seniors over 62 have options available to them using the FHA reverse for purchase to get access to their equity and downsize to a rancher.

Senior Almost Homeless in $900,000 Home and Can't Refinance

In many situations, seniors might not qualify for a refinance because of their fixed incomes and may not even qualify for reverse refinance because of lack of equity. However, many times they have just enough equity to pull out of their house if they sell their home.

I currently have a borrower who owns a home worth around $900,000. Two thirds of her house is maxed out with three mortgages (her payments are approximately $4,000 per month) and one note is coming due. She can't qualify for a traditional refinance because of her fixed income. If she doesn't sell and find another home, she may end up homeless at 68.

I explained to her that if she sold her home for $900,000, paid off the three mortgages, she would have approximately $300,000 to put down on another home (after the realtors' commission and closing costs). With the FHA Home Equity Conversion Mortgage Reverse For Purchase (which was signed by Congress last year), she would receive a loan/contribution of approximately $350,000 which would allow her to purchase a $650,000 house with no monthly payment. Another bonus to her is she would not have to qualify by income or credit. Her loan/contribution is based on her age, the down payment she is making and the purchase price of the home.

With this loan, she will be relieved of the $4,000 a month burden and will be able to purchase a home that has "senior friendly" amenities (which helps her stay independent).

Without the reverse for purchase loan, this lady could have ended up in dire circumstances. Instead, she was able to leverage the equity in her home to start a new life with the Reverse For Purchase.

For more information about this loan, you can read about it in the National Council of Agings' booklet, "Use Your Home to Stay At Home - A Guide for Older Homeowners Who Need Help Now." Go here to download it: http://www.ncoa.org/independence-dignity/home-equity.html

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