HECM for Purchase 101

With reverse mortgages, many experts advise against applying for one if the borrower is planning to move out of the residence in a short time period. However, there is a program called HECM for Purchase which can help senior citizens if they are looking to purchase a new primary residence. While some senior citizens may want to continue to live in their current homes indefinitely, others often opt to move for many reasons. Some may move because they find that their current space is too big to maintain or they may want to live closer to family while remaining independent. If you are looking to apply for a reverse mortgage to purchase a new home, then a HECM for Purchase would be a good option for you.

What is HECM for Purchase?

Home Equity Conversion Mortgage (HECM) for Purchase program is a reverse mortgage loan program that can assist senior homeowners with buying a new house and obtain a reverse mortgage in one transaction, which will eliminate the need for a second closing. The HECM for Purchase allows seniors to finance a portion of their new home with the reverse mortgage.   If a senior is looking to downsize their home, or to move closer to family, they can use the HECM for Purchase program to buy a new primary residence.

To qualify for a HECM for Purchase:

• To qualify, the youngest borrower must be 62 years or older.
• Like a regular reverse mortgage, borrowers must attend Housing and Urban Development (HUD) approved counseling session and receive a signed certificate indicating that they had done so.
• Payment of the difference between the purchase price of the new home and the reverse mortgage loan proceeds must be paid in cash from qualifying resources.
• Borrower must occupy property as primary residence within 60 days of closing.

Properties Eligible for HECM for Purchase:

• Single Family Homes.
• Two-Four unit properties (one of the units must be occupied by the owner).
• Manufactured homes after June 15, 1976 that meets HUD requirements.
• HUD-approved condos.
• Planned Unit Developments (PUD).

How is the HECM For Purchase is similar to a regular Reverse Mortgage loan?

• The borrower, not the bank, owns the property.
• You must continue to pay property taxes, homeowner’s insurance and any applicable    homeowner’s association fees.
• You are required to attend HUD-mandated counseling prior to applying.
• It is an FHA-insured loan.
• You must be 62 years or older to qualify.
• The loan is due once any of the following maturity events occur:
  • Last remaining borrower passes away
  • Homeowner decides to sell home.
  • The borrower(s) is not living at the primary residence for 12 consecutive months.
  • Homeowner/borrower does not fulfill obligations to paying taxes, insurance or homeowner’s fees.

How is the down payment determined?

Certain criteria are factored together to establish the down payment amount:

• The age of the youngest titleholder (must be at least 62 years old).
• Current expected interest rates and fees.
• The lesser of either the sales price or appraised value of home.

To learn more about the HECM for Purchase loan, speak with an advisor  at 1-888-808-8486.

Read Related Posts:

HECM for Purchase Basics

What is HECM for Purchase?

About the Author:

I have been working in the reverse mortgage industry for 20-plus years. My goal is to provide consumers the most up-to-date and relevant information about the reverse mortgage industry and how it can affect them.

Thanks for reading!

-Alan F.

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