ARAMCO Report - The Mother of ALL Mortgage Blogs!

Is a Reverse Mortgage the Right Financing Plan for Your New Home?

Posted by The Aramco Group on Wed, Mar 21, 2018 @ 09:03 AM

Keys in a door handle with a keychain that looks like a home.

As you enter your golden years, you may be considering buying a new home. Many seniors look to purchase a new home during retirement, whether in order to right-size their lifestyle, live closer to family and friends, decrease the financial burden of their current home, or to move to a warmer climate.

For some, it makes sense to take advantage of using a reverse mortgage to finance a new home — this is known as a reverse mortgage for purchase (or, HECM for purchase). Read on to find out how the process works and whether it may be the right strategy for you to move into a home you love.

History of the Reverse Mortgage for Purchase

Prior to 2008, a senior who wanted to leverage a reverse mortgage to purchase a home would have to use a conventional mortgage to finance the purchase, then repay that mortgage using a reverse mortgage. For many, this meant that insufficient credit documentation or income would prevent the purchase of a dream home. That changed in 2008, when Congress authorized a program known as HECM for Purchase, which enables seniors to take out a reverse mortgage in order to purchase a new  home. This program not only allows seniors to sidestep the qualifications for conventional mortgages, but also condenses costs to just one loan.

Before you choose this strategy to finance your next home, you should understand the requirements and expectations associated with HECM reverse mortgages.

Qualifications and Eligibility

To qualify for HECM for Purchase, you must be 62 years or older, with no outstanding federal debt in delinquency, and the home you wish to purchase must be your principal residence.

As for the type of home you’re buying, HECM for Purchase applies to:

  • single-family homes
  • two- to four-unit homes with at least one unit occupied by you
  • U.S. Department of Housing and Urban Development-approved condominiums
  • federally approved manufactured homes

A recently passed law allows lenders to take applications for new-construction homes prior to certification of occupancy. All of the above properties must also pass federal standards and flood requirements.

Using a Reverse Mortgage for Purchase

One of the primary benefits of a reverse mortgage is that it gives you the option of choosing your monthly mortgage payments or making no monthly payments at all. In fact, the lender pays you (up to a predetermined percentage of your new home’s total value), either in a lump sum or as a line of credit. Many people prefer the line of credit to avoid the temptation of spending all the money at once.

When you die or move again to another home, the amount given to you from the lender becomes due, and your heirs will inherit the remaining equity after interest and fees when you sell your home. In theory, you could also live in this home long enough that once your estate sells the home there would be no equity left after paying off the lender. While this doesn’t happen often, it explains the need for FHA mortgage insurance, which protects you and your heirs from ever owing more than the sale price of the home.

A reverse mortgage will cover anywhere from around 38-71% of a new home’s purchase price; the remaining balance must be paid from the sale of your previous home, or from another source of income or savings. The amount the HECM for Purchase covers will vary from person to person, based on age, current interest rates, and the appraised value of the new home.

As with many other loan programs, borrowers can choose between a fixed rate and an adjustable rate. The former is a known quantity; the latter often starts at a lower interest rate than the fixed-rate offering, but is the only reverse mortgage program that allows for the line of credit feature.*

You should always speak to a professional to understand the options available to you and the requirements for your unique situation. A reverse mortgage can offer an affordable strategy to finance the purchase of your next home and ensure you can live out the rest of your golden years right where you want to be.

To learn more about the reverse mortgage for purchase, and whether it’s the right strategy for you, contact our knowledgeable team at ARAMCO.

Topics: new home sales, Reverse Mortgage for Purchase, financing

ARAMCO Report - Monday March 16, 2015

Posted by The Aramco Group on Thu, Mar 19, 2015 @ 09:03 AM

Five million renters across the US are planning to buy a home in the next twelve months according to the Zillow Housing Confidence Index. This figure is up 25 percent relative to the same time last year. According to additional research by Zillow, typical renters should expect to pay 30 percent of their monthly income to rent. Buyers however can expect to spend only 15 percent of their monthly income on their mortgage payment. This is due to the current combination of historically low interest rates and below-peak home values keeping mortgage payments relatively low. 52,000 of San Diego renters will be looking to buy a home in the next year. Conforming no point 30 year fixed mortgage rates kept averaging close to 3.875 percent, and the 15-year rate once again averaged 3.125 percent. And now for something completely different: Mexico allows painters, sculptors, and other artists to donate part of their annual production of artwork in lieu of paying taxes.

For more information on a home purchase, refinance, or a reverse mortgage, visit our website at Aramco.Biz or call me at (877) 700-0942. This is Mehran Aram with today's ARAMCO Report.

Ask Mehran Aram

Topics: mortgage interest rates, San Diego, first-time buyers, rental, renting, financing, Mexico, Artists

ARAMCO Report - Wednesday January 14, 2015

Posted by Mehran Aram on Wed, Jan 14, 2015 @ 11:01 AM

According to CoreLogic in November nationwide completed foreclosures year over year were down 9.6% and are down 64% from the peak in September of 2010. Further evidence of a recovery in housing. Meanwhile record low mortgage rates pushed mortgage loan applications up by a whopping 49.1% last week. The largest weekly percentage gain since November 2008. Conforming no point 30 year fixed rates average 3 5/8ths with 15 year rates closer to 3%.

And now for something completely different. Did you know that Queen Elizabeth the II at the time a princess, actually trained as a mechanic and military truck driver? Of course that was during World War II.

For more information on a home purchase, refinance, or a reverse mortgage, visit our website at Aramco.Biz or call me at (877) 700-0942.

This is Mehran Aram with today's ARAMCO Report.

Ask Mehran Aram

Topics: Queen Elizabeth II, Housing Market, CoreLogic, 30 year fixed rates, foreclosures, World War II, Mortgage rates, financing

ARAMCO Report -Tuesday January 13, 2015

Posted by Mehran Aram on Tue, Jan 13, 2015 @ 17:01 PM

An earlier rally in stocks on Tuesday faded away completely, leaving stocks barely in negative territory and once again benefiting banks.  The yield on the 10 year treasury note fell again, closing below the 1.9% mark for the 1st time in 20 months. This thanks to yet another drop in the price of oil, now around $45 a barrel and the continuing uncertainty about the global economic growth. Conforming no point 30 year fixed rates average 3 5/8ths with 15 year rates closer to 3%

And now for something completely different… Did you know that in Dubai, the Burj Al Arab Hotel offers all its in house guest, a 24 carat gold iPad? The guest get to keep it for the duration of their stay and use it as a virtual concierge.

For more information on a home purchase, refinance, or a reverse mortgage, visit our website at Aramco.Biz or call me at (877) 700-0942.

This is Mehran Aram with today's ARAMCO Report.

Ask Mehran Aram

Topics: home prices, bonds, Treasury, yield, uncertainty, 30 year fixed rates, Mortgage Market, stock market, economist, oil, global economic, growth, Mortgage rates, financing

ARAMCO Report -Wednesday October 1, 2014

Posted by Mehran Aram on Wed, Oct 1, 2014 @ 17:10 PM

According to Trulia’s chief economist, despite the recent deceleration in home price appreciation, nationally home prices were 3% undervalued in the 3rd quarter of 2014. Meanwhile in the mortgage market, mortgage rates fell 1/8th of a % to their lowest level of the year. Conforming no point 30 year fixed rates now average 4 1/8th with 15 year rates closer to 3 1/4%. This following a big sell off in the stock market which sparked a big rally in bonds.

And now for something completely different: Did you know that it took the inventor of the Rubik’s Cube, Erno Rubik, an entire month to solve the puzzle before introducing it to the public?

For more information on a home purchase, refinance, or a reverse mortgage, visit our website at www.ARAMCO.Biz or call me at (877) 700-0942.

This is Mehran Aram with today's ARAMCO Report.

Ask Mehran Aram

Topics: home prices, bonds, Rubik's Cube, 30 year fixed rates, Trulia, Mortgage Market, stock market, economist, puzzles, Mortgage rates, financing

ARAMCO Report - Friday August 29, 2014

Posted by Mehran Aram on Fri, Aug 29, 2014 @ 17:08 PM

Recent rallies in European government bonds and a widening spread versus U.S. Treasuries could potentially lead to tightening of domestic monetary policy. If the European Central Bank decides to provide easier access of funds to European banks, Fed Chairwoman Janet Yellen may be compelled to increase rates earlier than the expected. What does this mean for homeowners? If looking to purchase a home with financing, or refinance your current loan, getting started before the end of the year is probably a wise decision, with 30-year fixed rates currently averaging 4.125% and 15-year rates still at around 3.25%.

And now for something, completely different: Deion Sanders is well known for his athletic ability, but did you know that in 1989 he became the only person to score an MLB home run and an NFL touchdown in the same week?

For more information on a home purchase, a refinance, or a reverse mortgage, visit our website at www.ARAMCO.Biz or call me at (877) 700-0942.

This is Alexander Aram filling in for Mehran Aram with today's ARAMCO report.

Ask Mehran Aram

Topics: Aramco Report, and now for something completely different, home purchase, bonds, Janet Yellen, European Central Bank, 30 year fixed rates, Loan, government, Deion Sanders, Football, Baseball, Europe, financing, MLB, U.S. Treasury, NFL