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Borrowers, aged 62 and older, now have an additional financial tool to help them purchase that home they formerly thought was out of the budget. As of january 1, 2009 the government is allowing the reverse mortgage to be used the fund the purchase of a home, rather than just as a refinancing tool. The program works almost identically to any other home purchase with a mortgage. The borrower brings in adequate downpayment, and the mortgage company funds the loan.

This comes as a boon to some seniors as financial or credit restraints prohibit them from purchasing their next home. Now they can do so and are not obligated to make monthly payments the mortgage company.

In recent years, due to general need and national marketing by major financial institutions such as Wells Fargo and Bank of America the reverse mortgage has come into its own. Its major benefit to seniors is to allow the senior borrower to convert the equity in the home into cash to be used at the borrower's discretion.

Only at the end of mortgage, when the home is finally sold, is the borrower or the borrower's heirs obligated to repay the reverse mortgage company the original loan amount plus accumulated interest.

These are the steps to the purchase program:

1. Contact a reputable FHA approved reverse mortgage company. The borrower will be advised as to how much money will be necessary for the down payment. Additionally, closing costsm, purchase price limits and various loan programs will be discussed.

2. Go home shopping and write contract based upon guidelines in the approval letter.

3. At closing the borrower will be required to make a down payment between 25% to 55% of the value of the home.

4. At closing, the reverse mortgage company funds the remaining balance and closing costs if desired by the borrower.

5. Borrower takes ownership of the home.

6. The obligations to the mortgage are as follows: live in the home as primary residence, keep the property in reasonably habitable condition (per FHA guidelines) and pay property taxes and home owners insurance.

In the near future the typical reverse mortgage candidate will continue to be one in need of funds to relieve financial stress. The reverse mortgage purchase, however, will cater to a certain profile and offer a viable financial tool.