Increase your purchasing power by combining your down payment with HECM proceeds and make it easier to afford the home you want.
Sometimes referred to as H4P, HECM for Purchase is a ﬁnancing option speciﬁcally for homebuyers who are age 62 and older that can help you get the funds you need to buy the home you want. It enables you to purchase a home by combining a one-time investment of personal funds with loan proceeds from a HECM mortgage to complete the transaction. The home you are purchasing secures the mortgage loan.
Unlike a traditional mortgage, monthly mortgage payments are optional, which can help boost your cash flow. You own the home as long as you live in it. The loan doesn’t become due until you pass away; sell the home; no longer live there as your primary residence; or fail to meet your responsibilities to maintain the property, pay any association dues, homeowner insurance, or property taxes. You can use a HECM Mortgage to purchase a primary residence, including single-family homes, townhomes, manufactured homes, and FHA-approved condominiums that meet requirements.
The HECM for Purchase program requires an up-front investment (down payment) from the buyer from assets you already own—such as money from the sale of a current home or investment, or funds you have in a checking, savings, CD, or retirement account—not another loan.
The minimum required investment is based on the age of the youngest borrower, interest rate and the value of the home being purchased (the sales price or appraised value, whichever is less); add closing costs; and then subtract the available HECM loan proceeds. It generally works out to about 29% and 63% of the sale price. The Department of Housing and Urban Development (HUD) determines the calculation and periodically updates their formula.
The most important feature of this type of loan is that there is NO personal financial liability for the buyer, their heirs or estate, for any loan balance that exceeds the value of the home when it is being sold to repay the loan.
How is it different?
Once all parties on the deed leave the home, pass away, sells the home, or no longer lives in the property as their primary residence, the borrower or their heirs must repay the balance due on the HECM mortgage or sell the home. If they sell the property, any equity remaining will go to the borrower or their heirs. If the property sells for less than owed on the HECM mortgage, the FHA mortgage insurance closes the gap and satisfies the loan balance. A HECM is a non-recourse loan, the home is the only collateral securing the loan.
For more information on the H4P program or to request a free packet, visit our education center at https://reversemortgagevalue.com.