Reverse Mortgage Purchase Program -HECM Purchase Mortgage
The Reverse Mortgage Purchase Program or HECM for Purchase Mortgage is a great retirement planning tool that allows seniors, over age 62, to purchase a new primary residence using proceeds from a reverse mortgage, thereby reducing the funds needed to close and avoiding a monthly payment.
Typically, the HECM purchase mortgage will allow a senior to obtain a home with anywhere from 35% to 50% of total purchase price based on borrowers’ age, allowing them to keep more of their retirement assets liquid for other purposes or to get more house for the same investment. Interest rates on a reverse mortgage are quite good, and the home appreciates based on the purchase price.
For example, a 62-year-old borrower wants to purchase a $250,000 home in New Jersey. Using the HECM for Purchase, the borrower needs to provide $152,750 of his or her own funds for the down payment. The HECM for Purchase reverse mortgage will finance the rest of the proceeds toward the purchase price.
Reverse Mortgage Purchase Program Requirements & Stipulations
The Reverse Mortgage Purchase Program works the same as a regular reverse mortgage after closing but has a few stipulations on the purchase.
The home must be purchased as a primary residence and the new owner (the HECM purchase mortgage borrower) must take possession and occupy the property within 60 days of the closing date. For the new home to be considered a primary residence, the buyer must live in the home 6 months and 1 day a year. In addition, the Reverse Mortgage Purchase Program can be used on a new construction property.
The funds used for closing will be verified and must be from an acceptable source. Cash on hand will be verified with a verification of deposit using two months of bank statements covering the last three months
Unacceptable funding sources include:
- Sweat Equity
- Trade Equity
- Rent Credit
- Cash or Credit received from any party involved in the transaction except customary based on state law.
- Cash received from any 3rd party or entity that is reimbursed by any party involved in the transaction
- Credit card advance
- Loan taken against another home, car or other asset
- Cash kept in a home safe
- Seller 2nd mortgage
- Seller concessions
Acceptable funding sources would include:
- Sale of another home
- Sale of boat, car or other personal property
- Liquidation of retirement assets
- Withdrawal from savings or checking account
- Liquidation of stock holdings
If your proceeds will come from a sale of another home which will close prior to your purchase, you will need a copy of the purchase agreement, a copy of the settlement statement, and a copy of the check given to you at closing. All these acceptable sources will need to be documented, and there may be others not listed here. Get with one of our Certified reverse mortgage professionals (CRMP) for the items that will be needed to document your funds for closing. Additionally, no seller concessions are allowed on the Reverse Mortgage Purchase Program. In addition, the seller is not allowed to carry a mortgage for any portion of the down payment to be paid after closing.
Advantages of the Reverse Mortgage Purchase Program
The Reverse Mortgage Purchase Program is a great way to leverage your liquid assets in retirement without increasing your monthly expense. With the Reverse Mortgage Purchase Programs, we have helped seniors:
- Buy a new home before their current home is sold
- Afford a home in Florida and keep the one back home
- Buy the type of home they really want in retirement without compromising their financial security
- Keep more assets liquid and in investment accounts
- Keep their assets available for emergencies and rainy days
Since HECM for Purchase is a relatively new product, we suggest that you call and schedule an appointment to talk with one of our Certified Reverse Mortgage Professionals… Greg Newman and Michael Markoff can be reached at 800-987-1225.