Purchasing a Home with a
HECM Reverse Mortgage
While Home Equity Conversion Mortgages (HECMs)
are traditionally thought of as a refinance product, on January 1,
2009, the HECM for Home Purchase program (H4p) became available. With this program,
qualifying borrowers may use an FHA insured HECM loan to purchase
a home that they will use as their primary residence.
H4p Loan Amount
Your loan amount for a reverse mortgage purchase is determined by the same HUD formula used for reverse mortgage refinances. The formula considers: 1) the lesser of; the appraised value of the house, the sales price, or the current FHA 203(b) county lending limit; 2) the age of the youngest borrower; and 3) the current expected interest rate.
You are required to make a down payment. This cash investment will be the purchase price plus loan costs less the amount provided by your reverse mortgage loan. The down payment must come from your own funds.
A list of borrower and property eligiblity requirements is available here.
As with reverse mortgage refinances, HECM home purchase loans feature
no payments on the loan balance - ever - as long as at least one borrower
on title lives in the home and other loan covenants are kept (such
as maintaining the house and keeping your homeowners insurance and property tax payments
current). And, like HECM refinances, HECM purchases are non-recourse loans, which means you (or your heirs) can never owe more than the
fair market value of your home.
The HECM for Home Purchase program has some program guidelines that
are unique to the program. HUDs' HECM program guidelines prohibit any "seller concessions". Their interpretation of what qualifies as a seller concession is quite broad, forcing the buyer to pay almost all transaction costs. For more information about this program contact me.
Did you know....
Already own a primary residence, but would like to buy a second home by the kids, a vacation home in the mountains, or head south to warmer weather every winter? You can use the proceeds from a HECM refinance of your primary residence to purchase another home - or for any other financial need that you may have.
Now is a great time to check into the benefits of a reverse mortgage.