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What is HECM for Purchase?

HECM for Purchase allows seniors, age 62 or older, to purchase a new principal residence using loan proceeds from the reverse mortgage

What is the purpose of this program?

The program was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction. The program was also designed to enable senior homeowners to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs.

What property types are eligible?

Existing one-to-four unit properties where construction has been completed and the property is habitable as evidenced by local jurisdiction issuance of certificate of occupancy or its equivalent. 

May a lender take an application on a property that is under construction and is not habitable?

No. The lender may only take an application once the Certificate of Occupancy or its equivalent has been issued.

Are gifts an acceptable source of funding?

No. Prospective mortgagors may only use their own money or money obtained from the sale of their assets. 

What would be an allowable FHA funding source for gap financing of the equity portion?

Acceptable funding sources include withdrawals from the mortgagor's savings or retirement accounts.

Can prospective mortgagors apply credit card cash advances towards the required monetary investment or closing costs?

No. All outstanding obligations connected to the HECM transaction, purchase or otherwise, must be satisfied prior to or on the date of closing.

Are seller concessions allowed?

No. Seller concessions are applicable to forward mortgages only.

Is the Real Estate Certification required?

Yes.

Can prospective mortgagors obtain a secured or non-secured loan from another asset (i.e., car, home equity line of credit, or investment property or second home) to satisfy the monetary investment or closing costs?

No. These other financing methods are prohibited, unless the unpaid or outstanding obligation can be satisfied prior to or on the day of closing.

Can the lender pull a credit report of your spouse even though he/she is not included in the loan?

Yes. Even if only one of you is included in the reverse mortgage, the creditor can obtain a credit report of your spouse in order to verify the extent of his/her financial obligations, which could put at risk this loan in the future.

Under what conditions may the mortgagor cancel the transaction?

You may cancel at any time before the closing date. If you decide to cancel you must notify the creditor in writing.

Can the HECM mortgagor participate in a rent back/leaseback agreement with the seller?

No. When purchasing a new principal residence, the HECM mortgagor has 60 days to occupy the home.

Does FHA have special eligibility requirements for first-time homebuyers?

No. FHA encourages all first-time homebuyers to meet with a reverse mortgage counselor that offers pre-purchase counseling to educate themselves on the responsibilities of becoming a homeowner. Prior to signing a sales contract, FHA encourages a home inspection of all properties that will serve as collateral for HECM for purchase transactions. The inspection serves two purposes: (1) to determine the magnitude, if any, of repairs and/or rehabilitation necessary for the home; (2) to negotiate the purchase price in situation where a home requires repair or rehabilitation.