As the last state in the union to approve it, Texas voted in early November to allow the reverse mortgage for purchase product to be offered to its residents and those moving to the state.
Texas has lagged other states that have long offered this type of reverse mortgage loan, due to longtime homestead laws that place certain barriers on access to home equity.
Through a vote of the state’s electorate on November 5 that approved “Prop 5,” however, the loan will be made available to all Texas residents through an amendment to the state constitution.
The constitution has been amended several times to allow for new reverse mortgage rules including the introduction of reverse mortgage lending in 1999 and other amendments in 2003 and 2005, with this addition being the most recent one.
How does a reverse mortgage purchase work in Texas?
The federally insured home equity conversion mortgage for purchase (HECM for Purchase), or “H4P” for short, allows a borrower to take a reverse mortgage and purchase a new home within a single transaction.
Because you are taking a new loan and buying a new house, it can save on a series of costs associated with closing on a new home purchase and new loan transaction.
How do I qualify?
Qualifications and requirements for the HECM for purchase are nearly the same as for all reverse mortgages that are insured by the Federal Housing Administration.
You must be at least 62 years old and own your home outright or have enough home equity in the home to pay off any existing mortgage balance through the reverse mortgage proceeds.
You’ll also need to attend reverse mortgage counseling, as will your spouse, to review with a Department of Housing and Urban Development-certified counselor to review the details of the loan and how it works.
How much home can I buy?
The value of your new home will depend on the amount of home equity in your current home and the amount of additional funds you can contribute to the new home. Use our calculator to get an estimate of how much you can qualify to purchase through a HECM for Purchase loan.
Where can I move?
Borrowers can use the reverse mortgage for purchase for any home that qualifies for an FHA loan. The home must be your primary residence and must be a 1 to 4 unit home.
The HECM for Purchase has helped many retirees relocate to homes that are closer to friends or family, or that are in desirable retirement locations.
For some, that might mean Texas. In fact, among the Top-10 cities ranked by AARP this year in its where to Retire for Less, Sherman/Denison, Texas made the list for its attractive median home price of $79,400, and lack of state tax on Social Security and pensions.
“Some 70 miles north of the bustling Dallas-Fort Worth metroplex, both Sherman and Denison are typical small-town Texas,” AARP wrote. “Yet this sunny metro region offers much more, including well-established neighborhoods, some of the lowest housing costs in the nation, and the considerable recreational appeal of nearby Lake Texoma.”
Many borrowers opt to customize their retirement homes using the loan by adding features that are geared toward aging, such as ramps or grab bars for those with limited mobility, or simply by adding upgrades to make the home more comfortable.
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