New FHA Program Allowing Use Of Reverse Mortgages To Purchase Home Prohibited In Texas; OK Everywhere Else

The San Antonio Express News reports:

• Imagine being able to buy a new home with a 40 percent down payment and not ever having to make a mortgage payment for the rest of your life. The Federal Housing Administration early this year approved such a deal as a form of reverse mortgage for home buyers who are 62 or older. But in Texas, the only thing anyone can do is imagine. The home-equity-for-purchase deal is available in 49 states, but not Texas.

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• [The available] options would be popular with many Texans as they reach retirement age. They won’t be able to do so, however, until the Texas Constitution is amended. Texas lagged [behind] the rest of the nation in offering home-equity and reverse mortgage loans by more than a decade because of the state constitution’s homestead protections.

• Home-equity lending finally was approved in 1997 by a constitutional amendment, followed by reverse mortgages in 1999. One of the Texas consumer safeguards requires owning equity in a house before anyone could apply for a reverse mortgage, which is a form of home-equity lending. No one could foresee the new home-equity-for-purchase option. Take that restriction away, and the home-equity-for-purchase deal becomes available in Texas, allowing lenders to apply reverse mortgage loans to the purchase price of the house.

For more, see Law blocks new reverse mortgage.