FHA Purchase Money Extraordinaire

  • May 27, 2014

With 10,000 baby boomers turning 62 years of age every day, the option of a Home Equity Conversion Mortgage (HECM) can help increase their purchasing power and flexibility when right-sizing to an all-on-one-floor maintenance-free home that offers a more carefree lifestyle while lowering their cost of living during retirement.

The HECM for Purchase is a Federal Housing Administration (FHA) insured home loan that allows seniors to use the equity from the sale of a previous residence to buy their next primary home in one transaction.  This reduces the cost of financing considerably.  Regardless of how long you live in the home or what happens to your home’s value, you only make one, initial investment (down payment) towards the purchase – you can eliminate monthly mortgage payments and preserve your cash.

The program might just be the perfect way for empty-nesters to take financing from daunting to doable.

Builders of 55-plus communities and Realtors who work with them are increasing sales dramatically with this financing that is very easy to qualify for.  This program can turn a “can’t help” buyer into a “can do” buyer.  Ask me for some statistics!

Introduced in 2009, HECM for Purchase is a variation of the traditional reverse mortgage and is designed for seniors ages 62 and older. Eligibility requirements, as stated by the FHA, include:

  • Must be 62 years or older
  • Any property used as collateral must be the primary residence
  • Down payment must come from asset accounts (cannot be debt)

The FHA also requires prospective loan applicants to be free of federal debt delinquencies, suspensions and debarments.

HECM loans are designed to be hassle-free and allow buyers to purchase their dream home. For example, maintenance-free living in a brand new ranch-style home with 2 or 3 bedrooms with flexible and spacious living areas plus luxury features throughout can be achieved with as little as 44 percent down. In addition, with the HECM loan, homebuyers enjoy not having monthly mortgage payments.

Available to finance the purchase of any primary residence, HECM for Purchase closing costs are similar to a regular FHA insured mortgage and are financed into the mortgage. They can include loan origination fee, FHA mortgage insurance premiums, a servicing fee (none charged by my company, Security One Lending), interest and certain third party fees. Loan amounts vary and the amount a buyer is required to bring to the home closing will vary depending on the youngest borrower’s age and the purchase price of the home.

A homeowner choosing a HECM loan is not personally liable for payment of the debt. The mortgage insurance fund that FHA manages assures that if the mortgage balance becomes greater than the loan balance, neither the borrower nor their heirs are liable for the deficit. FHA pays the lender the difference.

Check out the Reverse for Purchase tab.

Contact Bob Adams at 703-475-1555 for complete details or a quote.