Buy a Home in ReverseAtare Agbamureverse mortgage, credit, seniors In the following article, names have been changed to protect anonymity. Linda Larson wants to be closer to her daughter and grandchildren, who live in Arizona. At age 77, she is in good health, except for recurring bouts of arthritis, which, her doctor says, could be better managed in a warmer climate. Her retirement income and savings are strong, thanks to the careful planning of her late husband. Although she loves the suburban, Twin Cities-area house and neighborhood that she has lived in for more than 50 years, she longs to be near her only remaining family in warmer Scottsdale, Ariz. With the exception of a few home equity liens, her home is nearly paid for, and Linda, like many people her age, certainly does not want to worry about any new mortgage payments. However, she wants to buy her own place in Arizona, so to not burden her daughter or her family. Before now, in order to buy a condominium unit in Arizona and still avoid mortgage payments, she would have had to pay for the property outright, either by depleting her personal savings accounts or by utilizing the proceeds from the sale of her home in Minnesota . Let's say the custom-built, senior citizen-friendly Arizona condominium costs $120,000, and the net cash from her home sale in Minnesota came to $90,000. In order to eliminate any future mortgage payments, she could draw the $30,000 difference from her savings (a rather undesirable option), or find some product suited for her particular situation. Fortunately, Fannie Mae, the nation's primary investor in reverse mortgages, has designed a reverse mortgage product geared specifically towards this type of home buying. Developed in 1996, the Home Keeper for Home Purchase program, which is available in all 50 states, is Fannie Mae's proprietary reverse product. For elderly citizens faced with similar circumstances as Ms. Larson's, Home Keeper for Home Purchase is the only game in the reverse world able to be played. Simply put, Linda can now determine the most desirable combination of personal and reverse mortgage funds (which are dependent on age, marital status and adjusted property value), best-suited for her needs and credit. So, that being said, how does it work, and how can your borrower benefit? Using Home Keeper, Ms. Larson could buy the new Arizona condo for $120,000 in cash by accessing $62,400 in a new Home Keeper loan and $57,600 of the $90,000 in net cash from the old Minnesota home. Therefore, she gets to add the remaining $32,400 to her savings, rather than removing a similar amount, and frees herself from the burden of monthly mortgage payments. After receiving reverse mortgage education, evidenced with a certificate from a Fannie Mae-approved counselor, Ms. Larson can complete the loan origination process with a lender, the Home Keeper funds are finalized, and she receives a deed to her new home. At closing, the Home Keeper purchase funds are either distributed as a lump sum or line-of-credit, with leftover funds being paid to Ms. Larson on a monthly basis, for as long as she keeps the property as her primary residence. Eligible properties for this innovative mortgage include one-unit, single-family properties, condominiums, and units within a planned-unit development that conform to Fannie Mae's standards. Unfortunately, multiple-unit properties and cooperatives (co-ops) are ineligible. The costs are similar to other non-purchase reverse mortgage products. The origination fee is two percent of the adjusted property value, or $2,000, whichever is greater. Also, a one-percent fee goes to Fannie Mae at closing, and a monthly servicing fee, often between $15 and $30 dollars, will be applied, along with all standard, third-party closing fees. Borrowers who are at least 62-years-old can enjoy the benefits of this ingenious financial device, which include the elimination of payments; the ability for elders to move to newer, more-manageable homes in warmer, healthier climates; and the opportunity elders to retain some extra cash, without dipping into their savings. It is clear from this overview of Home Keeper for Purchase, that a reverse mortgage is a very flexible liquidity tool that our ever-growing elder population can use to add vitality and richness to their golden years. Atare E. Agbamu, CRMS, is a senior mortgage consultant and director of training at Inver Grove Heights, Minn.-based Peoples Choice Mortgage. Headquartered in Erlanger, Ky., Peoples Choice mortgage is a member of the National Reverse Mortgage Lenders Association. Mr. Agbamu has served on the Minnesota Association of Mortgage Brokers Inc. 2000-2001 Executive Council and currently serves on the Board of Little Brothers--Friends of the Elderly in the Twin Cities. He can be reached by phone at (651) 389-1105 or e-mail [email protected].