What is HECM for Purchase?

Home Equity Conversion Mortgage (HECM) for Purchase (H4P) allows seniors, with at least one borrower age 62 or older, to purchase a new primary residence. Combine your down payment with loan proceeds from the reverse mortgage to purchase a home! Specifically, the program allows seniors to purchase a (new to them) principal residence with a reverse mortgage in a single transaction. This enables senior homeowners to relocate – move closer to family members, find the retirement home of their dreams or perhaps downsize to a home that meets their current needs.

Requirements:

A HECM for Purchase (H4P) transaction has all of the same requirements as a reverse mortgage and is specifically designed to help a senior purchase a new residence without being burdened with new monthly debt. Some specifics-

  • The youngest homeowner is age 62 or older
  • The purchased home will be the primary residence
  • The purchased home will be occupied within 60 days of the closing
  • No other mortgage loan other than the HECM can be used to buy the home
  • The down payment must be paid in cash from reserves or quite often, the proceeds from the sale of an existing home

Additional Details:

The amount that can be borrowed under a HECM for purchase, as with a traditional HECM mortgage, will be dependent on three factors –

  • age of the youngest borrower
  • current interest rates
  • the lesser of the value of the property being purchased or the HECM loan limit
When comparing a HECM for Purchase to a refinance HECM mortgage, the significant difference is the down payment at closing.  A HECM for Purchase (H4P) creates equity rather than having equity in a home you already own.

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