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Barbara's Blog - Using Reverse Mortgage to Purchase

Real Estate Agent


Reverse mortgages were developed to help seniors aged 62 and above as a way for them to stay in their homes and use the funds to supplement their income.  But some seniors want to downsize or trade a two-story home for a single-level dwelling.

The US Department of Housing and Urban Development (HUD) has a program seniors like these called FHA Reverse Mortgage to Purchase program also known as a Home Equity Conversion Mortgage (HECM) to purchase program. 

The Home Equity Conversion Mortgage (HECM) for Purchase was created by Congress four years ago to streamline home-buying transactions and cut costs, says Peter Bell, president of the National Reverse Mortgage Lenders Association. Before, seniors would buy a new home, incurring closing costs, and then take out a reverse mortgage on the new home, triggering new closing costs. The HECM for Purchase rolls this into one transaction and one set of closing costs.

 Here’s how it works:

 -Allows seniors to buy a new home with no credit or income requirements, and no monthly payments for as long as they occupy the home as their primary residence, maintain the home, pay property taxes, and so on

 -The buyer is responsible for the down payment

 -The down payment plus the proceeds from the reverse mortgage has to come from the sale of the current home

 -The buyer cannot us money from credit cards, bridge loans, seller financing or seller contributions for closing costs

 -The sale of the current home and the purchase of the new home can be completed in a single transaction.

 -Buyers must occupy the home as their primary residence within 60 days of the closing date

 -If purchasing new or ongoing construction, the construction must be complete and a certificate of occupancy must be issued prior to the loan application

 -Eligible homes for purchase include single-family homes, HUD-approved condominiums, planned unit developments, two-to-four-unit properties, and manufactured homes built after June 15, 1976.

 -Reverse mortgages to purchase may not be used on coops, second homes, boarding houses, bed and breakfasts, or homes on leased land.

With a growing population living longer and most likely to outlive savings, Social Security and other retirement funds a reverse mortgages to purchase can be a logical option for seniors. To learn more, consult with a lender that is HUD-approved to learn more about HECM for Purchase loans.


Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

Barbara Puorro This is valuable information for those looking to downsize.

Jul 27, 2015 04:22 AM