HECM for Purchase

CB028929Recently, HUD has authorized the use of a reverse mortgage to purchase a home. Sounds a little odd, but is actually a great way for seniors to downsize with the added “No Monthly Payment” that reverse mortgages offer.

Here is how it works. Let’s say that a couple are in a two story home that they really don’t see as a functional house for them as they age and their ability to get up and down the stairs becomes more difficult. Though their income is at a point where they don’t really want to add an additional monthly payment. A HECM for Purchase will allow them to come in with a down payment, likely used from the sale of their home, of anywhere between 35%-40% (depending on the age of the youngest borrower) of the appraised value of the new home and not have any payments for the remaining years of their life while they live at home.

The reverse mortgage comes with all of the guarantees that a typical reverse mortgage would have. Though it was possible to do a reverse mortgage in the past on a purchased home, it could only be done after the original mortgage (we call it a forward mortgage) was approved and completed. The problem with this is that they would have to double pay closing costs, origination fees for both loans. This provides more flexibility and options for those who would like to move, but didn’t feel that they wanted to pay the additional fees upfront.

Be aware that because it is a different type of transaction and that underwriting is more along the lines of a traditional mortgage underwriting, if there are plans to rent their existing home, disclosures of income may be a requirement, as well as other disclosures may be required.

For more details surrounding this new program, visit here.

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One Comment on “HECM for Purchase”


  1. HECM for purchase is a good program combination that ease the borrower in terms of easier and cheaper process with greater benefits.


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