HECM REVERSE MORTGAGE FOR PURCHASE

On January 1, 2009, seniors became eligible to use a Reverse Mortgage to purchase a principal residence as part of HUD’s “HECM for Purchase Program".

Definition

HECM Reverse mortgages are available to seniors who would like to buy a new home if:

• The youngest homeowner is age 62 or older
• The purchased home will be the primary residence
• The purchased home will be occupied within 60 days of closing
• No mortgage loan other than the HECM can be used to buy the purchased home
• The difference between the purchase price of the home and the HECM proceeds must be paid in cash or from the sale of an existing home

Qualifications

Special restrictions:

• If the homeowner is using cash (instead of the sale of your existing home) to make up the difference, that cash must be “seasoned” for 60 days.
• Cash from a gift is not acceptable.
• To prove that the homeowner has “eligible funds” for the closing, any of the following documents can be provided:
  • Letter of Verification of Deposit from the bank
  • Proof of liquidation of retirement assets
  • Deed of sale
  • HUD1 home sale statement

The property must be the primary residence and may be:

• 1-4 Units
• Condominiums
• Fully completed (with certificate of occupancy or equivalent)
• Land contracts are acceptable

Ineligible property types include:

• Cooperatives
• Homes without a Certificate of Occupancy or its equivalent
• Boarding houses
• Bed and breakfast establishments
• Existing manufactured homes built before June 15, 1976
• Existing manufactured homes built after June 15, 1976 that fail to conform to the manufactured home construction safety standards or lack a permanent foundation

What if the home needs repairing? Most repairs aren’t critical but major ones have to be taken care of before the transaction can close:

• Critical health and safety and structural integrity issues must be repaired
• Repairs must be completed prior to closing by the seller
• The buyer can not pay for any repairs before they own the home
• The repairs must be included in the purchase agreement

Costs

With a HECM for Purchase, all of the normal costs associated with selling and buying property apply as well as the normal Reverse Mortgage Fees.