Did you know senior borrowers age 62 and older can use a Home Equity Conversion Mortgage (HECM) to purchase a home? Many senior borrowers have heard about the benefits of paying off an existing mortgage utilizing a reverse mortgage. However, many are still unaware that they can also purchase a new home by combining a reverse mortgage with a down payment. This enables senior borrowers to purchase a new home without having to worry about making monthly mortgage payments (borrowers must remain current on property taxes, homeowner’s insurance and HOA dues)! The HECM for home purchase also has limited income and credit requirements, has many consumer safeguards, is FHA-Insured and HUD regulated!
Purchasing a home with a reverse mortgage is very like purchasing a home with a conventional mortgage.
What is the HECM for Purchase (H4P)?
A Home Equity Conversion Mortgage (HECM) for Purchase is a reverse mortgage loan that allows homeowners age 62 and older to buy a home using a larger down payment to build the necessary equity in the home rather than using all their available assets.
Purchase a New Home with No Monthly Payments*
*Homeowners are responsible to keep current property taxes, homeowner’s insurance, HOA dues and home maintenance.
What is a Home Equity Conversion Mortgage for Purchase (H4P)?
The H4P program allows buyers to combine a down payment with loan proceeds to purchase a new home and not make a loan payment* as long you they live in the home.
H4P can increase your purchasing power and make it easier to afford the home you want. The most important feature of this type of loan is that there is NO personal financial liability for the buyer(s), their heirs, or their estate for any loan balance that exceeds the value of the home when it is being sold to repay the loan.
H4P Eligibility Requirements Set by the Federal Government
- You must be at least 62 years old. (This applies to all co-owners listed on the home’s title)
- The home you are buying must be your primary residence and must meet FHA/HUD guidelines. Eligible properties are single-family homes and FHA- approved condominiums.
- You must have your down payment or “required investment” from an allowable source. While certain restrictions apply, these are generally funds you have had for at least 90 days or the sale of an asset that you already own. The most common sources of the down payment money are proceeds from the sale of a current home or money the buyer has in a checking, savings, CD, retirement or investment account.