New HUD's Reverse Mortgage for Home Purchase Program
You can now buy a new or existing home using the FHA Government-Insured Reverse Mortgage (Home Equity Conversion Mortgage , HECM)
What is a HECM for Purchase?
Hecm for Purchase is a reverse mortgage that allows seniors, age 62 or older to purchase a new principal residence using loan proceeds from the reverse mortgage.
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 by eliminating the need for a seond closing. For instance, if a 70 year old senior wanted to purchase a $300,000 home, he or she could put approximately $111,400 down and finance the balance of $188,600 using a reverse mortgage. He or she would now have a property valued at $300,000, paid $111,400 and would then make no monthly payments for as long as he or she maintained the home as a principal residence. (Based on todays rates and loan programs) The program was also designed to enable senior homeowners to relocate or downsize to homes that meet their physical needs, i.e., handrails, one level properties, ramps, wider doorways, etc. If you look at the chart below it will give you an idea of some sample down payment requirements.
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THE DOWN PAYMENT REQUIREMENTS
Age of Youngest Borrower (if 2 or more)
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Purchase Price
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Age 62
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Age 65
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Age 70
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Age 75
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Age 80
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$100,000
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$49,500
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46,950
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42,700
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38,050
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33,200
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$150,000
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69,700
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66,000
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59,750
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52,950
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45,900
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$200,000
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90,500
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85,550
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77,300
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68,350
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59,100
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$250,000
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110,700
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104,600
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94,350
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83,250
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71,800
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$300,000
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131,000
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123,650
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111,400
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98,150
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84,150
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$350,000
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150,350
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142,750
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128,500
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113,075
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97,200
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$400,000
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171,500
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161,800
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145,500
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127,975
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109,900
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$450,000
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191,250
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180,350
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162,100
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142,375
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122,100
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$500,000
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211,000
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198,900
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178,600
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156,775
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134,300
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$550,000
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230,750
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217,450
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195,200
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171,150
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146,500
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$625,500+*
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260,575
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245,450
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220,200
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192,900
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$164,925
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*$625,500 is the maximum allowable home value used for calculating net proceeds available from the FHA Reverse Mortgage Program (HECM). THESE ARE ONLY ESTIMATES BASED ON TODAY'S RATES AND LOAN PROGRAMS AND ARE SUBJECT TO CHANGE.
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What property types are eligible?
Existing 1 to 4 unit family homes
Newly constructed principal residence where a Certificate of Occupancy or its equivalent has issued by the appropriate local authority
Condominiums that are acceptable to HUD
Manufactured homes, built after June 15th 1976 and meet HUD's permanent foundation guidelines
What would be an "allowable funding source (down payment) for the equity portion?
Proceeds from the sale of a previous home, personal savings or retirement account or liquidation of an existing investment. No gifts are acceptable nor can the borrower obtain a secured or non-secured loan from another asset including equity lines on other property, personal loans, or credit card advances.
Are seller concessions allowed?
No. Seller concessions are applicable to tradional mortgages only. No seller financing is permitted.
If the HECM proceeds do not cover the sales price, can part or all of the property's indebtedness be subordinated behind the first and second HECM liens if the existing lien holder is willing to subordinate?
No, all existing liens must be satisfied at the HECM closing.
When must the borrower occupy the new property?
The HECM borrower has 60 days to occupy the home. Prior to the closing, the HECM borrower and seller should agree to a date for physical occupancy and the lender should confirm occupancy.
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