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What Is a HECM For Purchase Loan? (H4P)

A HECM purchase loan is not too different from a conventional HECM. It allows you to buy a home post-retirement and is, therefore, also known as a Home Equity Conversion Mortgage for purchase. The latter allows senior citizens over the age of 62 years to purchase a new residential property without any required monthly mortgage payments. Senior homeowners use the HECM for purchase proceeds along with the equity from the sale of an earlier primary home to buy a new one. And all of this is completed in a single transaction with one down payment.

H4P vs. HECM

An H4P loan allows a senior to use the proceeds from their HECM loan to put down a down payment on a new property, essentially providing a reverse mortgage and new home in the same transaction. Borrowers can use their own money to cover 40-50% of the purchase price, while the loan covers the other 50-60%. Using an H4P loan can significantly impact your finances and allow you to do more with your money without the worry of monthly mortgage payments.

Like all other HECM loans, repayment is not due until you no longer use the home as your primary residence, whether that means you move out, sell the property or pass away. Likewise, you or your family can then sell the home to repay the loan.

The HECM purchase loan is a great option if you:

  • Live on a fixed income and cannot use other traditional financing options.
  • Need a home to better suit your needs.
  • Want to hold on to some of the proceeds from your home's sale.
  • Are ready to "right-size" your home, move closer to family or relocate to a more temperate climate.
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HECM for Purchase Video


How Are HECM For Purchases Commonly Used?

“Right-Sizing” is an industry term used for today’s seniors when the time comes to purchasing their final retirement home.

“Right-Sizing” can be either:

Downsizing – selling your existing home and buying a smaller, less expensive home – can be a great way for seniors to best leverage their home equity to fund as well as reduce retirement expenses. Downsizing can also provide quality of life benefits.

If you choose to use a HECM purchase loan when you downsize, you can eliminate all monthly mortgage expenses. Homeowners who are interested in downsizing can often generate enough money from the sale of their property to easily pay the larger down payment required for a HECM for Purchase transaction.

Upsizing – Sometimes seniors want to upsize to a larger home that fits their lifestyle, like in a new all-inclusive retirement community… their “dream” retirement home they’ve always wanted. Maybe on the golf course or waterfront. The HECM purchase can easily allow them to buy the bigger home even if they don’t have all the cash.

Again, the HECM for Purchase only needs about 1/2 of the sales price to complete the sales transaction and they have NO monthly mortgage payments for life and they didn’t have to either; take on a traditional mortgage, with 30 years worth of payments, or tap into their retirement portfolio to buy the home all cash.

Eligibility Requirements

  • At least one homeowner needs to be 62 years or older
  • Purchased home must be a primary residence
  • Property must be a single-family home, 2-to-4 unit owner-occupied dwelling, FHA approved condo, or manufactured home that meets FHA requirements.
  • The difference between the purchase price of the new home and the HECM for purchase loan proceeds must be paid in cash from qualifying sources such as the sale of the prior residence, home buyer’s other assets or savings
  • The borrower must complete an FHA approved counseling session
  • Must meet minimal financial eligibility criteria as established by FHA
  • Find out if you qualify in 3 easy steps

Safeguards for Borrowers

  • Non Recourse: FHA insures that you can never owe more on the loan than what the house is worth when the HECM is repaid. All remaining equity belongs to you or your heirs.
  • FHA Approved Counseling: To be certain you understand the HECM Program FHA requires that you participate in a one-time independent 3rd party counseling session with an FHA approved counselor. This is usually done over the phone for your convenience.
  • FHA Fee Limitations: The closing fees are limited and regulated by FHA for your protection.
  • No Pre-Payment Penalties: Although the loan is not due until you permanently vacate or sell the home, payments can be made at any time with no penalties.

Senior Lending is the #1 Rated H4P Company In Florida

As you can see, the Federally Insured HECM is a unique program that Senior Lending specializes in. So, when the time comes to "Right-Size," let our experienced loan specialists help you purchase your dream retirement home. Our goal is to provide you and your family with financial peace of mind, so you can live out your retirement the way you want.

To speak with a HECM for Purchase Advisor, please call 800-822-1190. We're an H4P company willing to talk you through everything you need to know to make smart decisions about your local HECM for Purchase. You can also contact us online to discuss our reverse mortgage options. Get started today.

Have You Thought About “Right-Sizing”?

This question has been around for years, but until recently some seniors were not able to downsize or upsize to a home that better fit their lifestyle. Now, there’s a powerful tool that many Real Estate professionals are using with their senior buyers. The HECM for Purchase or H4P can be used to either downsize or upsize to purchase their dream retirement home.

If you are 62 years or older, the Home Equity Conversion Mortgage (HECM) for Purchase loan, or H4P, can help you buy your next home without required monthly mortgage payments. The HECM for Purchase or H4P is a Federal Housing Administration (FHA) insured home loan that allows seniors to use the equity from the sale of a previous residence to buy their next primary home in one transaction.

Regardless of how long you live in the home or what happens to your home’s value, you only make one, initial investment (down payment) towards the purchase.

Find out how easy it is to qualify in 3 easy steps!

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