Figuring out what you can afford

One of the greatest benefits of a Home Keeper for Purchase is that you may be able to afford a slightly higher valued home that you wouldn't ordinarily be able to buy. Because reverse mortgages don't base your loan on credit scores or income levels, the two factors that usually drag a loan value down, you may be able to get more money out of the Home Keeper for Purchase than you would with a regular forward mortgage. But don't start touring mansions quite yet. The operative words here are "may" be able to afford a "slightly" more expensive home. The Home Keeper isn't going to get you into a lakeshore condo if you're currently living in a one-room shack, but with the right equity and a decent down payment, you may be able to move up a little in the housing world.

You may want to use this extra boost to buy a lovely little retirement home, or go all out and get the most house for your money. Either way, remember that if you get the loan when you're relatively young and have to throw a significant portion of your existing savings into a down payment, you're going to be hard-pressed when it comes time to put food on the table since the Home Keeper for Purchase does not continue to pay you over the life of the loan — it lives up to its name and is "for purchase" only. People are making a habit of living beyond their means these days, but you can control your future finances by declining to buy a home that you really can't afford. A good counselor and/or originator will help you sort out your finances so that you can clearly see what you can reasonably afford.

Before you get your heart set on a Home Keeper for Purchase, do some investigating. Find out how much equity is in your home, how much homes cost in the area you want to live in, and what it would cost to modify the home you're in now. It may make more sense for you to sell your home on your own and buy a new one in the traditional way, or to get another type of reverse mortgage to make improvements on your existing home. If home prices are much higher where you want to live, you may be in for a rude awakening when you try to apply your equity. If you're no good with math, ask a friend or family member to help you sort out the numbers, or take your concerns to your counselor (more on how to prepare for a counselor session in Chapter 8).

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