HECM For Purchase - H4P

A HECM for Purchase Loan, also known as a Reverse for Purchase, is a government-insured loan that gives homeowners 62 and older the convenience and flexibility to purchase a new home while eliminating mortgage payments. You make a down payment and let your HECM for Purchase loan cover the rest.

*Proprietary reverse mortgages are also available to borrowers age 52 and up to purchase homes up to $10 million.

What is HECM for Purchase?
The HECM reverse mortgage for purchase product is a Federal Housing Administration (FHA) insured hecm reverse mortgage. This loan allows seniors to use the equity from the sale of a previous residence to buy their next primary residence in one transaction. You only make one initial investment (down payment) towards purchasing a primary residence, Regardless of how long you live in your home regardless of your home’s value, unlike a conventional mortgage.

Why Consider the Loan?
No matter what your needs may be, using a reverse mortgage to purchase a home may help you.

Eliminate monthly mortgage payments while you live in the home - You cannot lose your home under normal circumstances. If you comply with the terms of the loan, which include paying your property taxes and homeowner's insurance, as well as any maintenance fees and other fees that may be applicable. Your home is safe from foreclosure as long as you remain in compliance with the terms of the loan.
Increase your purchasing power - Use the funds from a reverse mortgage to purchase “more home” and improve your cash flow.
Real estate Options: single-family home, condominium, multifamily, or manufactured home
Spend less money on the initial investment.
Right size to smaller, lower maintenance home. Either move to be closer to family and friends or find a home that better suits your lifestyle by requiring less maintenance.
Use the loan proceeds to purchase a home closer to family or friends
Lower your cost of living during retirement
Take advantage of the worry-free lifestyle offered by a senior housing community.

Your closing costs and interest rates are currently at historic lows, and loan amounts on loan balances for a primary residence can currently be at record highs.
If your spouse is under age 62, they can be an eligible non-borrowing spouse and remain in your home for life.

Note: Proprietary-Jumbo-Reverse loans are also available for purchases of single and multi-family homes and condominiums with a higher sale price from $800,000 to $10 million. Non-FHA-approved condominiums are also eligible.

If you sell your current house and buy another one during the same calendar year, you can take advantage of some valuable tax considerations.

Retirement researchers make a new case for reverse mortgages
A growing number of retirement researchers, such as Harold Evensky, John Salter, and Wade Pfau, have conducted numerous studies to evaluate the pros and cons of a reverse mortgage, along with its potential uses and value in retirement income distribution planning. These leading researchers have all agreed that the reverse mortgage credit line offers particular value as a tool to improve the probability of successful client outcomes and legacy value.

What safeguards are in place?
Over the years, improvements to the HECM reverse mortgage product have made it more suitable for older Americans. There are now necessary protections in place to make sure it can support customers like you for years to come.

You are required to undergo reverse mortgage counseling through an impartial, independent counseling agency.

The lender requires a financial assessment. This is so that the lender can determine whether or not you are capable of meeting the financial requirements of the loan. These duties would include the ability to pay your property taxes and homeowners insurance.

If your spouse is younger than 62, they can qualify as an eligible non-borrowing spouse. This will make it possible for them to continue living there even after you have moved out or pass away. Providing that they continue to fulfill all of the requirements associated with the loan. (They must continue to pay for property taxes, homeowner’s insurance, and maintain the home.)

What’s different about HECM for Purchase versus a traditional or conventional mortgage?

Borrower age:

HECM for Purchase: Exclusively for home buyers age 62+. (Now we have access to private purchase programs for 52+)
Traditional mortgage: No age restriction (except being legal age to enter a contract).

Repayment requirements:

HECM for Purchase: Flexible repayment feature — The borrower has the option of making monthly principal and interest payments of whatever amount, from zero to the amount that they feel comfortable repaying each month. This feature also helps them keep more of their savings and retirement assets and improves their cash flow. The flexible repayment feature is much simpler for buyers to finance the home of their dreams.
As with any mortgage, the borrower must keep current with property-related taxes, insurance, and maintenance as part of their ongoing loan obligations. Repayment is generally required once they sell the home, pass away, move out or fail to meet their loan obligations.
Traditional mortgage: Monthly principal and interest payments are required. Repaying the home loan increases the equity.

Down payment amount:

HECM for Purchase: Depending on the buyer's age or, if applicable, the age of the Eligible Non-Borrowing Spouse, the required down payment is between about 45% and 62% of the purchase price. (This assumes financed closing costs.)
The HECM loan provides the rest of the money for the purchase. In addition to providing buyers with the option to keep more of their assets and utilize them as they see fit, this product also frees buyers from the obligation of making monthly mortgage payments. This is a smart choice than paying all cash and depleting assets.
Traditional mortgage: Typically requires a smaller down payment and has a term of 30 years.

Eligible properties:

HECM for Purchase: Single-family homes; FHA-approved condominiums; townhouses or Planned Unit Developments (PUDs); 2-to-4 unit owner-occupied homes; and some manufactured homes meeting Department of Housing and Urban Development (HUD) guidelines.
Traditional mortgage: Single-family homes; condominiums; townhouses or Planned Unit Developments (PUDs); 2-to-4 unit owner-occupied homes; manufactured housing; second homes; vacation homes; and other real estate investment properties.

Protection against owing more than the home is worth:

HECM for Purchase: A Federal Housing Administration (FHA)-insured* program. HECM for Purchase has a non-recourse feature, which means the borrower can never owe more than the home is worth when the loan is repaid. The house is the only source of repayment regardless of the loan balance at maturity.
Traditional mortgage: Most do not have a non-recourse feature. Since home values can decline, the borrower could owe more than the home is worth.

Your right to cancel a reverse mortgage:
In the majority of cases involving reverse mortgages, you will have three business days following the closing of the loan to cancel the arrangement without incurring any fees or other consequences. This is referred to as "rescission," which is your legal right.

In order to cancel, you are required to give the lender written notice. Send your letter by certified mail and ask for a return receipt so that you have record of the date you sent the notice of cancellation and the date the lender received it. Always be sure to keep a copy of any correspondence that you have with your lender. If you decide to cancel the reverse mortgage loan, the lender has twenty days to repay any money you've already contributed toward the financing of the loan.

If you believe that there is a reason to cancel the loan beyond the initial three-day period, you should seek the assistance of a lawyer in order to determine whether or not you have the right to cancel the loan.

Note: This information only applies to Home Equity Conversion Mortgages (HECMs), which are the most common type of reverse mortgage loan.

For eligibility considerations, see our In-Depth Information.
Give us a call or fill out a request to see if you qualify for a Hecm. Find out how much you may be eligible to receive toward your purchase price on a HECM for purchase loan.