Purchase Your Dream Home
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, 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. Let’s talk a bit more about a HECM for Purchase.
What is a HECM purchase loan?
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.
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 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.
- 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 prior residence, home buyer’s other assets or savings
- Borrower must complete a FHA approved counseling session
- Must meet minimal financial eligibility criteria as established by FHA
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 a 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.
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 specialist help you purchase your dream retirement home.
To speak with a HECM for Purchase Advisor please call 800-822-1190.