You can use an FHA HECM 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 the primary residence. No mortgage loan other than the HECM will be used to purchase the home. The difference between the purchase price of the home and the HECM proceeds will be paid in cash from the sale of an existing home or another source of funds.
Example – A retired widow, age 70, rents an apartment but has saved $100K to buy a property.
She finds a home that is selling for $250K so she is short by $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
There are some special restrictions: 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 plus proof of liquidation of retirement assets. If they are using proceeds from the sale of a previous residence they will need to provide: HUD-1 Home Sale Statement. There may be additional requirements as well, such as a letter or intent or explanation - your reverse mortgage consultant will assist you in obtaining the required documentation.
The property must be the primary residence and can be 1 to 4 units, FHA Approved Condominiums, and Approved Manufactured Homes.
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 by seller prior to closing
- The buyer cannot 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 associated with selling and buying a property apply as well as the normal reverse mortgage fees.
Deborah Nance
Your Local Southern California Reverse Mortgage Professional
