HECM for Purchase

If a senior homeowner is in the market to buy a new home, the HECM for Purchase might be the best option.

The requirements for this program are

  • The youngest homeowner must be at least 62 years old
  • The purchased home must be the primary residence
  • The purchased home will be occupied within 60 days of closing
  • No mortgage loans can be used to buy the home in addition to the HECM for Purchase
  • The difference between the purchase price of the home and the HECM proceeds must be paid in cash or from the sale of the existing home

Strict restrictions

  • Cash as a gift is not permitted
  • If the homeowner is using cash, the cash must be “seasoned” for at least 2 months
  • There must be proof that the homeowner has “eligible funds” by providing any one of the following documents
  • Deed of sale
  • HUD1 home sale settlement
  • Proof of liquidation of retirement assets
  • Letter of Verification of Deposit for the bank

The property must be a primary residence and can be

  • 1 to 4 units
  • Land contracts
  • Fully completed
  • Condominiums

The property may not be

  • Cooperatives
  • Boarding Houses
  • Bed and Breakfasts
  • Homes without a Certificate of Occupancy
  • Existing manufactured homes built before June 15,1976
  • Existing manufactured homes built after June 15,1976 that do not conform to safety standards or lack a permanent foundation

If repairs need to be done on the purchased home, major repairs need to be completed before the negotiation can close

With the HECM for Purchase, the same costs as selling and buying a property apply as well as reverse mortgage fees.

Using cash

  • A man does not own property but has saved $100,000 to purchase a $250,000 property making him short $150,000
  • Using a HECM for Purchase he can borrow $150,000
  • Taking the entire amount available and his $100,000 savings, he buys the home
  • He owns the home and has no mortgage payments

Selling an existing home

  • A woman’s home has appraised for $250,000 on which she still owes $50,000 mortgage making her home equity $200,000
  • She wants to purchase a home for $300,000
  • She can borrow $165,000 using a HECM for Purchase
  • She buys the new home using $200,000 from the sale of his home and $100,000 from the HECM for Purchase
  • She now owns a new home with no mortgage payments and has $65,000 left over in her reverse mortgage proceeds