Reverse Mortgage Purchase

pink two story house with for sale sign out frontIn January 2009, HUD introduced the ‘FHA HECM for Purchase’ program, allowing seniors to purchase a new principal residence and obtain an FHA HECM mortgage within a single transaction, eliminating the need for a second closing. Sometimes known as a ‘reverse purchase mortgage’ or a ‘purchase reverse mortgage’, the Reverse Mortgage for Purchase program enables senior homeowners greater freedom and quality of life in their retirement years.

Reverse Mortgage Purchase Program Options

Reverse mortgage purchase guidelines will differ according to each homeowner’s situation, but here are some general options to consider:

  • Downsizing: The homeowners can sell the larger family home they’ve lived in for years and move into a smaller, more convenient home that requires less maintenance. With a reverse mortgage, the borrowers use only a portion of their proceeds to purchase a new home with no monthly mortgage payment. The rest of the proceeds are free to be used as needed.
  • Relocating: The retired homeowner is able to move to a different city to be closer to family or to simply pursue their favored lifestyle. By selling their home and purchasing a new home with an HECM for Purchase loan, the homeowner can relocate with no monthly mortgage payment to the city of their own choosing.
  • Family Live-in Arrangements: The senior homeowner can purchase a home with the intent of incorporating a family member or members to provide in-home living assistance. The senior can stay in the home and does not incur in-home health care costs. The HECM for Purchase mortgage property must be the primary residence of the senior and in his/her/their name only. Property within a Living Trust is acceptable with verification of Trustee powers.
  • Gift Funds Allowance: An HECM for Purchase borrower may utilize sourced and seasoned gift funds from a family member for the down payment on a home. Such gift fund allowances enable family members to help the senior borrower by providing part or all of the down payment, and the senior lives in the home with no monthly payments thereafter.
  • Multi-Unit Properties: Borrowers may purchase up to a four-unit property with an HECM for Purchase loan as long as they occupy one of the units as their primary residence. The other two or three units may be rented out, creating income.