Buying a Home
Home Equity Conversion Mortgage for Home Purchase (H4P)
If your goal is to right size your housing needs by purchasing a new home instead of accessing the equity in your current home, one way to do so is to utilize a HECM for Home Purchase (also known as an H4P, Reverse For Purchase and Purchase HECM). This means utilizing a HECM loan on the home you are buying instead of having to qualify for a traditional mortgage. When you utilize a Purchase HECM, your HECM funds are paid in a lump sum directly to the seller at the close of escrow – just like with a traditional mortgage. However, the big difference is that you will never be required to make monthly loan payments for as long as you live in your new home** and continue to satisfy loan conditions. Loan requirements include home maintenance and payment of property taxes, homeowner’s insurance, and any HOA fees.
The Purchase HECM is ideal for those who want to purchase the best home for their retirement needs – without impacting their monthly cash-flow by taking on another monthly payment obligation.
Benefits of Purchasing Your Next Home With a HECM:
- Increased purchasing power to buy the home that best meets your needs.
- Keep additional cash assets in reserve to maintain a more comfortable retirement.
- Increased monthly cash flow- since monthly mortgage payments are not required you are able to minimize the impact on your monthly obligations.
Comparing H4P to other Purchase Options
Qualify for a HECM for Purchase
Whether you are rightsizing your housing needs, moving closer to family, a better climate or simply to a home that better meets your needs, qualifying criteria for a HECM is much easier than that of a traditional mortgage. All you need is…
- Have a minimum of 50% as a down payment on the home, the percentage of which is determined by your age: the older you are, the lesser the amount is required to put down.
- Live in the new home as your principal residence and keep up with property maintenance, taxes and insurance
- Meet the current residual income and credit requirements
- It is still possible to qualify for a HECM, however a set aside of funds for your property taxes and insurance may be required if income and credit requirements are not met.
Requirements of the Homeowner and Safeguards
- Homeowners are responsible for maintaining the home as their primary residence, keeping up with property maintenance, and staying current on paying property taxes, required insurance, and any homeowners’ fees. Home must be maintained in habitable condition as defined by HUD.
- The balance of the loan, including interest charges, becomes due when the borrower(s) do not use the home as their primary residence or fail to meet their responsibilities under the terms of the loan.
- Neither your estate nor your heirs are personally liable to cover the difference if your home is sold at a loss if, at the time of your passing (e.g. your loan balance is greater than the value of your home).
**Borrowers are responsible for occupying the home as their primary residence, keeping up with property maintenance, and staying current on paying property taxes, required insurance and any homeowners’ fees. The balance of the loan, including interest charges, becomes due when the borrowers do not use the home as their primary residence or fail to meet their responsibilities under the terms of the loan.