The HUD Home Equity Conversion Mortgage (HECM), more popularly known as a reverse mortgage has been around for decades. However, most real estate professionals don’t realize you can use a HECM to buy a new home. Buyers, age 62 and beyond, can take advantage of the HECM to buy the “right sized” house of their choice.

This opens up so many opportunities for early retirements, delaying the draw on social security to maximize its benefit, and postponing, reducing, or eliminating the use of retirement funds for housing costs.

Here are some of the details about using the HECM to purchase real estate.

Important Facts for Home Purchase with a Reverse Mortgage

Basic Qualifications

  • All borrower(s) must be at least 62 years old and occupy the home as primary residence within 60 days of closing.
  • Down payment amount is based on age of youngest owner, the lower of the sales price, appraised value or maximum claim amount and the expected interest rate.
  • Demonstrated ability to pay ongoing property tax, insurance and association dues.

Only one FHA Insured Loan per borrower at a time. Therefore, if any of the Borrower’s existing real estate holdings are secured by an FHA mortgage, they must be paid off at or prior to closing. 

Reverse Mortgage Counseling- This is an important aspect of the program and must be completed prior to much of anything getting done towards contractual commitments. Definitely required PRIOR to signing a purchase agreement!!!

All borrowers, non-borrowing spouses and attorney-in-facts must receive counseling and the Counseling Certificate must be available prior to opening escrow.

Request a Pre-Counseling Packet and Counselor List before making an offer or showing homes. The property address can be filled in later. Don’t let counseling delay your deal!

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