If you’re in your sixties or seventies and you’ve been trying to buy a home, you may have had a version of this week. You did everything right. You got your paperwork in order. You sold, or you’re ready to sell your current home. You looked at the houses, you liked one or more, you wrote the offers. And then someone else gets it. It happened again. And again.
At some point you sit at the kitchen table and wonder whether you’d waited too long, or whether you should just stay put, who wants to live near to the kids or grandkids anyway?
Before you decide that, I want to tell you about something most buyers your age have never had explained to them in detail. Not because it’s a secret, but because a lot of folks in my industry simply don’t.
Here’s what usually goes wrong, and it has very little to do with you. You may have savings, equity from the home you’re selling, Retirement accounts, Social Security, maybe a pension. On paper you’re in better shape than most of the people you’re bidding against.
But a regular mortgage doesn’t really look at that. It looks at your monthly income and asks whether a monthly payment fits inside it. That test was built for someone with a steady paycheck, and if you’re retired or semi-retired, you don’t have one. A lender looks at a person with $600,000 in the bank and tells them they qualify for less than a 35-year-old with a decent salary and student loans.
Either you decide to pay cash, which caps you at whatever your savings will cover and empties your accounts to do it. Or you take a conventional loan, get approved for less than you expected, and carry a monthly payment into retirement that you’d rather not have. Both options lead to the same spot, an offer that just isn’t as strong as the one that got accepted.
If you’re 62 or older, there’s a financing option built specifically for this stage of life. It’s a reverse mortgage used to buy a home, and the FHA-insured version is called a HECM for Purchase*. There are also privately offered versions of higher-priced homes, and some of those start as early as age 55.
Most people have heard of reverse mortgages as something you get on a house you already own. Fewer people know you can use one to purchase a new home. The structure is straightforward. You make a substantial down payment, usually from the sale of your current home or liquidation of investments or both. The reverse mortgage covers the rest of the purchase price. For as long as you live in the home as your primary residence, there is no required monthly mortgage payment (As with any mortgage, you must meet your loan obligations, keeping current with property taxes, insurance and keeping your home in good condition).
If you were looking at $600,000 homes because that’s what you could pay cash for, that same $600,000 used as a down payment might reach considerably higher by 30/40%, depending on your age and current interest rates. Or you can keep more of your money. Some people don’t want a more expensive house. They want the same house and cash reserves still in the bank for unexpected expenses, travel, grandkids, or inflation when things get more expensive just because. This structure lets you choose when and how.
Qualifying works differently. A reverse mortgage doesn’t run you through the same debt-to-income test. Instead, there’s a financial assessment that looks at your credit history and whether you have enough income left over each month to comfortably handle the ongoing costs of the home. For someone with assets but modest reported income, that’s a much fairer conversation. When you’re not stretched to the top of an approval, you could compete on price, keep reserves in reserve, and close on a normal schedule. You stop being the offer that gets passed over.
I’m not going to pretend this is free money, because it isn’t, and anyone who talks about it that way is doing you a disservice. You still own the home, and you still have real obligations. However don’t forget property taxes. Homeowners insurance, HOA dues, if your new place has them and keeping the house maintained is still your responsibility. You also must live there as your primary residence. If those obligations stop being met, the loan must be repaid.
Because you’re not making monthly payments, interest is added to the balance instead of paying down. That means the loan grows over time and the equity in the home shrinks. When you eventually sell or pass away, the loan is repaid, typically out of the sale, and whatever is left over goes to you or your heirs. If the home sells for less than the balance, FHA-insured loans are non-recourse, so neither you nor your heirs owe the difference out of pocket.
That last part matters to some families where the house is meant to be the inheritance. It’s an important conversation, and I usually suggest having it with your adult children in advance1.
And sometimes, after we run the numbers, the answer is that a conventional loan or paying cash is the better move for you. That happens, and I’ll tell you when it does.
If you’re still shopping and still losing, it’s worth twenty minutes to find out what changes for you if anything. The math depends on your age, the price range you’re in, and where rates are, so general articles like this one can only take you so far.
What you’d get out of a conversation with me is this, here’s what you could buy, here’s what you’d put down, here’s what you’d keep, and here’s what it costs you today and over time compared to the alternatives. Then you decide.
The one thing I’d hate for you to do is give up on the move because offers didn’t work out, when nobody ever showed you this option in detail. You’ve spent decades building what you have. Explore all options then make the right choice for you!
Let’s Connect!
Have questions or ready to take the next step in your home financing journey? I’m here to help.
Call: (858) 526-3037
Email: carl.spiteri@originpoint.com
Carl Spiteri
Producing Partnership Branch Manager
NMLS ID: 286890
Licensed in: AZ, CA, CO, FL, ID, MI, MT, NV, OR, SC, TN, TX, WA, WY
*OriginPoint is an FHA Approved Lending Institution.
- OriginPoint offers additional loan products which allow you to access the equity within your home. Please contact your loan officer to see which option is best suited for your financial need
This is not a commitment to lend. Home Equity Conversion Mortgages (HECMs) are eligible for borrowers 62 and older. Borrower must pay property taxes, Homeowner’s insurance, HOA dues (as applicable), and maintain the home and using it as primary residence or the loan will need to be repaid. Otherwise, the loan must be repaid when the borrowers leave the home more than 12 consecutive months, transfer their property’s title to another person, the last borrower passes away or sells the home. Prices, guidelines and minimum requirements are subject to change without notice. Subject to review of credit and/or collateral; not all applicants will qualify for financing. It is important to make an informed decision when selecting and using a loan product; make sure to compare loan types when making a financing decision. This material has not been reviewed, approved or issued by HUD, FHA or any government agency. Rate is not affiliated with or acting on behalf of or at the direction of HUD, FHA or any other government agency. To find a Reverse Mortgage counselor near you, search the HECM Counselor Roster at https://entp.hud.gov/idapp/html/hecm_agency_look.cfm or call (800) 569-4287.
Charges such as an origination fee, mortgage insurance premiums, closing costs and/or servicing fees may be assessed and will be added to the loan balance. The loan balance grows over time, and interest is added to that balance. Interest on a reverse mortgage is not deductible from your income tax until you repay all or part of the interest on the loan. Although the loan is non-recourse, at the maturity of the loan, the lender will have a claim against your property and you or your heirs may need to sell the property in order to repay the loan or use other assets to repay the loan in order to retain the property. You should know that a reverse mortgage is a negative amortization loan which means that your mortgage balance will increase while your home equity decreases if you do not make principle and interest payments on your loan. This may make it more difficult to refinance the loan or to obtain cash upon the sale of the home. However, you will never owe more than the home is worth when the loan is repaid.
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.
All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. OriginPoint does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error-free. Some information in the publication may have been provided by third parties and has not necessarily been verified by OriginPoint. OriginPoint its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.
