HECM for Purchase
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 now 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 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.
Using a HECM for Purchase to “Right-Size” for Retirement
“Right-Sizing” is a 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 for Purchase 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 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 for 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.
- Youngest titleholder must be 62 years or older
- Purchased home must be a primary residence occupied within 60 days of loan closing
- 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 loan proceeds must be paid in cash from qualifying sources such as the sale of prior residence, home buyer’s other assets or savings
- Borrower must complete a HUD approved counseling session
- Must meet minimal financial eligibility criteria as established by HUD
Safeguards for Borrowers
- Mortgage Insurance Premium (MIP) ensures the amount owed on the loan can never be more than the value of the home at time of sale
- Independent HUD counseling is required prior to loan application
- The HECM for Purchase is Non-Recourse (No Personal Liability) You can never owe more than the value of the home after the last person passes or the home is sold. The lender cannot look at any other assets for repayment.
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 advisers help you purchase your dream retirement home.