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Buy home with FHA Reverse Mortgage

You can buy a new home using an FHA Reverse Mortgage and there are so many potential advantages for those over the age of 62, especially for the self-employed. Let me explain -

Normally when you apply for a mortgage, your credit score and your income determine the amount of money you can borrow to purchase a home. Then, of course, the home itself must appraise for an amount that justifies the loan. If you are buying a home selling for $400,000, for example, and you are able to put $150,000 cash down, you must still qualify based on your current income and credit history to borrow $250,000. The home also needs to appraise for at least $400,000. What if your retirement income doesn't qualify for this amount or what if you are self employed and can't truly show "personal income". The bank won't lend you the money.

Instead of a conventional mortgage, you could apply for an FHA Reverse Mortgage (HECM). The amount of cash you invest becomes your equity. The approval process depends on the appraised value of the property itself, not on your income or credit score. As long as this home is your primary residence and you qualify based on age, you live in this home with no payments as long as you continue to live there.

I saw this work just recently when a self employed buyer presented me with an offer on one of our listings. Because all of his income is in the business, he does not have "personal income" and can't qualify for a traditional mortgage. Instead, he has secured an FHA Reverse Mortgage to make the purchase putting down almost 40%. His lender has locked in an extremely good rate and expects we can go to settlement in 30 days! This may be one of the easiest transactions of 2010. Read more about it.

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