Purchase with a Reverse Mortgage
Purchase a home and have NO MORTGAGE PAYMENT!
In 2009, the Federal Housing Administration introduced a new product called the Home Equity Conversion Mortgage for Purchase, or HECM, which allows older Americans to buy a new home by putting a reverse mortgage on it (meaning no Mortgage Payment). So far, the product has been little used.
- The minimum age is 62 years old.
- The home must be the borrower’s primary residence.
- The borrower must be able to pay the home’s property taxes, insurance premiums, homeowners association dues and any other ongoing property costs.
- The borrower must have no delinquent federal debt.
- Single-family homes.
- 2- to 4-unit homes with 1 unit occupied by the borrower.
- Condominiums approved by the U.S. Department of Housing and Urban Development.
- FHA-approved manufactured homes.
What is the purpose of the 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, i.e., handrails, one level properties, ramps, wider doorways, etc.
Why it can be good
A reverse mortgage for purchase allows older Americans to buy a house that better suits their needs without dumping all their retirement assets into it, which would be the case in an all-cash transaction. It also lets them avoid dipping into their monthly fixed income, which would occur if they took out a traditional mortgage.
“This is not just a mortgage product. It’s a financial, cash-flow tool for retirees,” says Rob Cooper, national director of strategic partners for Reverse Mortgage Funding. “It gives them more purchasing power if they don’t want to drain all their assets. It also gives them the luxury to get a better lot, to add all the upgrades they want and to still have no mortgage payment.”
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.