The HECM for Purchase program was established in 2008. Before it was created a homeowner had to relocate and purchase a home with a traditional mortgage, establish residency, and then refinance the home with a HECM if desired.  This lengthy process would require two sets of closing costs and an extensive waiting period. Since 2008 homeowners do not have to experience the time-consuming process instead, they can purchase a residence using a HECM with only one closing event and no waiting period.

When would it be a good option?
Often older adults want to downsize, move closer to children, move nearer to a city or better health care services, or leave the city and move to the country. Sometimes the home they are in does not have the required improvements necessary for aging in place, or it is a 2-story and single-level floor plan is preferred.  Often the desire to live in a retirement community is a good choice. There are endless reasons why older adults choose to move to a new home.

How does it work? To qualify the homeowner must be 62 yrs. or older and a lender review can determine how much they can borrow ( called the principal limit). Then a significant investment may be required to satisfy the remainder of the sales price and closing costs. A homeowner might be selling their home to move to the next. Some of the sale proceeds are used for the down payment of a new home and the HECM is used as the purchase money.  For example, a $600,000 house is purchased with a $250,000 down payment and the balance is your reverse mortgage loan with no monthly payments.

• HECM for Purchase loans are only available for a borrower’s primary residence which must be occupied within 60 days.
• HECM counseling is required prior to application.
• A sales contract must be fully executed before a loan application is taken.
• The seller can pay some closing costs but there are restrictions. Speak with your CRMP professional.
• If the borrower plans to retain the home they are leaving, they must document that they can pay both the current and new home property charges.

To learn more about reverse mortgages, contact your local certified Reverse Mortgage Professional  (CRMP) for guidance and expertise.