What is HECM for Purchase?
HECM for Purchase 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. The program was also designed to enable senior homeowners to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs, i.e., handrails, one level properties, ramps, wider doorways, etc.
GENERAL OVERVIEW
What is HECM for Purchase?
HECM for Purchase 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. The program was also designed to enable senior homeowners to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs, i.e., handrails, one level properties, ramps, wider doorways, etc.
PROCESSING
Is the fixed interest rate eligible in a HECM for purchase loan?
Yes.
PROPERTY
What property types are eligible?
Existing one-to-four unit properties where construction has been completed and the property is habitable as evidenced by local jurisdiction issuance of certificate of occupancy or its equivalent.
Can a lender take application on a property that is under construction and not habitable?
No. The lender may only take application once the Certificate of Occupancy or its equivalent has been issued.
What property types are ineligible?
Cooperative units
Newly constructed residences where a Certificate of Occupancy or its equivalent has not been issued by the appropriate local authority
Boarding houses
Bed and breakfast establishments
Existing manufactured homes built before June 15, 1976; and
Existing manufactured homes built after June 15, 1976 that fail to conform to the Manufactured Home Construction Safety Standards, as evidenced by affixed certification labels (e.g., data plate and HUD certification label) and/or lack a permanent foundation as required in HUD's Permanent Foundations for Manufactured Housing Guide.
FUNDING
Are gifts an acceptable source of funding?
No. Prospective mortgagors may only use their own money or money obtained from the sale of assets. FHA prohibits the use of loan discount points, interest rate buy downs, closing cost assistance, builder incentives, gifts or personal property given by the seller that would benefit financially from the transaction.
What would be an "allowable FHA funding source" for gap financing of the equity portion?
A withdrawal from the mortgagor's savings or retirement account would be an acceptable funding source.
How is the maximum claim amount and principal limit calculated?
For HECM purchase transactions only, The maximum claim amount will be the lesser of the appraised value, sales price or FHA mortgage limit for a one family residence.
Is seller financing permitted?
No.
MISCELLANEOUS
Does FHA have special eligibility requirements for first-time homebuyers?
No. FHA encourages all first-time homebuyers to meet with a reverse mortgage counselor that offers pre-purchase counseling to educate themselves on the responsibilities of becoming a homeowner. Prior to signing a sales contract, FHA encourages a home inspection of all properties that will serve as collateral for HECM for purchase transactions. The inspection serves two purposes, to determine the magnitude, if any, of repairs and/or rehabilitation the home as well as helps the buyer to negotiate the purchase price in situation where a home requires repair or rehabilitation.
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