HECM for Purchase

You can use a HECM for Purchase reverse mortgage to buy a new home if

  • The youngest homeowner is 62 or older
  • The purchased home will be occupied within 60 days of closing
  • The purchased home will be their primary residence
  • No mortgage loan other than the HECM can be used to buy this home
  • The difference between the purchase price of the home and the HECM proceeds must be paid in cash from the sale of the existing home

Selling an existing home

  • A single man, age 62, recently appraised his home for $250K and still owes $50K; meaning his home equity is now at $200K.
  • He finds a home for $300K he wants to purchase
  • With his age, he is eligible to borrow about $165K on the new property
  • He decides to buy the new property using $200K from the HECM for Purchase and keeps the $65K left over in this reverse mortgage credit line
  • He now owns his new property and does not have to pay any mortgage payments

Paying cash

  • A single woman, age 70, rents a home but has saved $100K to buy a property
  • She finds a home that is $250K so she is short $150K
  • She decides that HECM for Purchase is her best option. At her age she can borrow around $150K on the $250K home
  • Taking the full $150K and her $100K savings, she buys the home
  • She know owns the home and has no mortgage payments

Special restrictions

  • If the cash is a gift, it is not acceptable
  • If the homeowner is using cash, the cash must be seasoned 60 days
  • There must be proof that the homeowner has “eligible funds” for the closing and any of these documents must be provided
  • Letter of Verification of Deposit from the bank
  • Proof of liquidation of retirement assets
  • Deed of Sale
  • HUD1 home sale statement

The property must be a primary residence and can be

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

Ineligible property types include

  • Cooperatives
  • Homes without a Certificate of Occupancy or equivalent
  • Boarding house
  • Bed and Breakfast establishments
  • Existing manufactured homes built before June 15, 1976
  • Existing manufactured homes built after June 15, 1976 that does not conform to the manufactured home construction safety standards or lack a permanent foundation

If repairs need to be done on the home, major repairs must be taken care of before the transaction can close:

  • Critical health, safety and structural integrity issues must be repaired
  • Repairs must be completed prior to closing by seller
  • The buyer can not pay for any repairs before they own the home
  • The repairs must be included in the purchase agreement

Costs

With a HECM for Purchase the usual costs with selling and buying a property apply as well as the normal reverse mortgage fees.