Home Equity Conversion Mortgage (HECM) for Purchase

A Home Equity Conversion Mortgage (HECM) for Purchase is a reverse mortgage that allows seniors aged 62 or older to purchase a new principal residence using loan proceeds from the reverse mortgage.

This option provides more flexible buying power while also allowing you to eliminate monthly mortgage payments.

Eligibility Requirements

• The youngest titleholder must be 62 years or older
• The purchased home must be occupied within 60 days of closing
• The purchased home must be your primary residence
• You must meet financial eligibility criteria as established by HUD
• You may need to set aside additional funds from the loan proceeds to pay for property taxes and homeowners insurance
• The difference between the purchase price and the HECM proceeds must be paid in cash from the sale of an existing home or another source of eligible funds

Special Restrictions

• Gift funds may be an acceptable form of down payment; however, certain restrictions may apply
• If using cash, the funds must be seasoned for 60 days
• There must be proof of eligible funds from qualifying sources for closing. Depending on the source, specific documentation may be required

Eligible Property Types

The property must be your primary residence and can be one of the following:

• Single-family home
• FHA-approved condominium
• Manufactured home (must meet FHA guidelines)

Ineligible Property Types

• Cooperatives
• Newly constructed principal residences without a Certificate of Occupancy or equivalent issued by the local authority
• Boarding houses
• Bed and breakfast establishments
• Multi-unit properties

Property Condition Requirements

All major home repairs must be completed by the property seller before the loan can close:

• Property must meet FHA’s minimum property requirements
• Critical health, safety, and structural integrity issues must be repaired
• Repair set-asides are not permitted with the HECM for Purchase
• The buyer cannot pay for any repairs before owning the home
• Repairs must be included in the purchase agreement

Costs

With a HECM for Purchase loan, the usual costs associated with buying and selling a property will apply, along with fees specific to a reverse mortgage loan.