Kicking off on January 1st, prospective home buyers age 62 and up can purchase a home with a reverse mortgage, provided that the home will be their primary residence.

An article by Theresa Sullivan Barger explores the possibilities that this program affords for senior home buyers. Although reverse mortgages have been in existence for quite some time, most people had used them to take equity out of their existing homes either to pay off the mortgage, help with expenses, or pay the property tax bill.

However, folks at FHA (the Federal Housing Administration) were observing a trend: many seniors were selling their homes, buying new ones, and using the reverse mortgage to pay the bill for the new home. By doing so, seniors were slammed with fees as a result of going through two mortgage transactions.

FHA staff realized that traditional reverse mortgage programs did little or nothing for those who wanted to downsize or move into a more senior-friendly (one-level) home, for example. The solution? A Home Equity Conversion Mortgage for purchase program. The HECM program is a win-win: thanks to a law that was implemented this fall, origination fees were capped at $6,000 – and FHA insurance “protects both the borrower and the lender” (which is a major plus in today’s topsy-turvy market).

While my parents are still in the “under 62″ crowd, they downsized about two years ago, and fortunately, right before the housing bubble burst. As the parents of 5 girls, 4 of whom have moved out of the house, they decided it was too much work to maintain the large 5-bedroom, 4-bathroom home that they built in 1988. Now, they live in a small but cozy home that essentially had only 1 bedroom until they renovated the entire basement to include two rooms there. While many neighbors and friends were shocked to hear that they would be selling their large, beautiful Victorian-style home, these busy boomers who are juggling work, family, and church commitments were thrilled to downsize and de-clutter. It’s a little tight when the family is all together, but it takes about half the time to clean, which I know my Mom appreciates.

So whether you are looking for a smaller home or a home that’s a stone’s throw from your children and grandchildren, find out if a reverse mortgage will make that dream a reality. Moving is not an easy task, but neither is maintaining a large, aging home when you’re a senior on your own or strapped for cash.

Is a reverse mortgage right for you or your parents? Want to read a little more about it before you decide? Check out these sites:

http://www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm

http://www.aarp.org/money/revmort/

http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea13.shtm

-Michelle Seitzer