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.
By Deborah Nance
Your Local Southern California Reverse Mortgage Professional
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iReverse Home Loans, LLC, NMLS#810502 originates reverse mortgages in Alabama, Alaska, Arizona (MB-0919584), California, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oregon (ML-5378), Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont (1164-MB), Virginia, Washington and Wisconsin.
Important Information: Reverse Mortgages are neither "endorsed" nor "approved" by the Federal Government. The FHA (Federal Housing Administration) provides certain insurance benefits for lenders and borrowers in connection with the lender’s HECM loans; the FHA does not make or originate loans. The owner(s) retain title to the property that is the subject of the reverse mortgage until the person sells or transfers the property and is therefore responsible for paying property taxes, insurance, maintenance and related taxes. Failing to pay these amounts or failure to maintain the condition of your property may cause the reverse mortgage loan to become due immediately. A reverse mortgage is a complex loan secured by your home. Whether such mortgage makes sense for you depends on your financial situation and needs. For these reasons, we strongly recommend that you consult with a qualified independent housing counselor, family members and other trusted advisers before making this decision. This website is not from HUD or FHA and was not approved by HUD or any government agency.