What is HECM for Purchase?Home Equity Conversion Mortgage (HECM) for Purchase allows seniors, with at least one borrower age 62 or older, to purchase a new primary residence. Combine your down payment with loan proceeds from the reverse mortgage to purchase a home! Specifically, the program allows seniors to purchase a (new to them) principal residence with a reverse mortgage in a single transaction. This enables senior homeowners to relocate – move closer to family members, find the retirement home of their dreams, and perhaps downsize to a home that meets their current needs.
Requirements:A HECM for Purchase (H4P) transaction has all of the same requirements as a reverse mortgage and is specifically designed to help a senior purchase a new residence without being burdened with new monthly debt. Some specifics-
- The youngest homeowner is age 62 or older
- The purchased home will be primary residence
- The purchased home will be occupied within 60 days of closing
- No other mortgage loan other than the HECM can be used to buy the home
- The down payment must be paid in cash from reserves or quite often the proceeds from the sale of an existing home
Additional Details:The amount that can be borrowed under a HECM for purchase, as with a traditional HECM mortgage, will be dependent on three factors –
- age of the youngest borrower,
- current interest rates,
- and the lesser of the value of the property being purchased or the HECM loan limit.
When comparing a HECM for Purchase to a refinance HECM mortgage, the significant difference is the down payment at closing with a HECM for Purchase creates equity rather than having equity in a home you already own.