To kick off the New Year I am going to go over a program that is fairly new to Texas. So listen up!!!
Are you 62 or older and considering purchasing a new home but concerned about your nest egg? Maybe you are considering selling your home and downsizing; two story to a energy efficient one story; or you want to purchase a new home closer to your children and grandchildren. You’ve worked hard and now you would like to live in a home that fits your needs today and have the comfort and peace of mind for the future. Perhaps your financial obligations, income or other concerns are preventing you from moving. Well, the new to Texas FHA insured H4P HECM for Purchase loan allows you to put only “about half” down of the total sales price and still have no monthly payment. You still have taxes, insurance, and any HOA dues.
The H4P HECM for Purchase loan can increase purchasing power for 62+ homebuyers as well as provide a powerful asset management tool. Unlike a traditional mortgage the H4P has no required monthly mortgage payments. As the borrower you are still responsible for property taxes, homeowners insurance, property maintenance, and any Home Owners Association Dues.
The costs associated with a HECM loan are similar to a traditional home purchase loan with the key difference being that the HECM loan requires FHA mortgage insurance. FHA insurance is what makes it possible to have a loan that requires NO monthly principal and interest payments, AND has NO pre-set maturity date. Interest and fees are simply added to the loan balance so that it increases over time, rather than decreasing. It is a “non-recourse” loan which means that the buyer, their heirs and estate are NOT responsible for any loan balance that exceeds the value of the home being sold. Remember, you are the homeowner and always the title holder; as long as you live in the property. No more worries about ever “being underwater” with this loan.
How can you use this loan? Here is an example.
Closer to her family-and to reaching her retirement goals. Mary is a 70-year old widow who wanted to buy a home that was closer to her children and their families. The price of the home she wanted was $350,000, and she was asking $425,000 for her home. She planned to use the proceeds from the sale of her home to pay cash for the new one. After paying realtor fees and taxes, this would have left her with about $40,000 and no monthly mortgage payment.
However, by using an H4P loan instead, Mary was able to buy the new home with only $165,737 of her own funds. She retained $144,263 more than if she paid cash—and still, no monthly mortgage payment. It also enabled her to say ‘yes” to more options in the new home, and secure a premium lot that she wouldn’t have been able to afford otherwise. Her financial planner took the remaining funds and invested them in Mary’s retirement portfolio.
The local real estate community is just now discovering this product and its many uses. Since January of this year, many seniors have enjoyed the benefits of this program/product.