Taking Advantage Of The HECM For Purchase Program

Program allows seniors to use reverse mortgages to purchase homes

Taking Advantage Of The HECM For Purchase Program
March 23, 2016

Seniors over the age of 62 can take advantage of the Federal Housing Administration’s (FHA) Home Equity Conversion Mortgage (HECM) program to purchase a new home. This program uses a reverse mortgage to pay for the property. Implemented in 2009, HECM was created to address the fact that many were using a more expensive and complicated method to use a reverse mortgage to buy property: they would first obtain a standard mortgage loan to buy a property, then pay off that mortgage with a reverse mortgage. HECM is a more affordable and easier way of doing this.

A senior who qualifies for a HECM will be able to use this reverse mortgage to cover a portion of the new home’s cost, but they would need to use other assets to cover the remaining cost. These funds could come from savings, cashing out bonds, or selling their current residence. The only restriction is that the remaining cost cannot be covered via any other type of loan or other debt.

Once the purchase is complete, the senior owns their home but does not have to repay the mortgage on it until they no longer use the property as their primary residence. They may sell the home at any point and use the income from the sell to pay off the remaining balance or, if the loan ever exceeds the total value of the property, simply turn over the property to the mortgage company.

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  Conversation   |   11 Comments

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Steffanie | 03.23.16 @ 16:00
This is an awesome idea. I hope my in-laws can take advantage of it as they are currently house hunting.
Erin | 03.23.16 @ 16:01
I didn't know this program existed. I'm not sure I would want to buy a new home at that age, but I know many people who have. This is something to keep in mind. Thanks!
Nancy | 03.23.16 @ 16:03
I know about reverse mortgages but didn't know you could do this. Definitely something to look into.
Carla | 03.23.16 @ 16:04
I have often wondered how this program worked. It is a great program to think about as we reach that age.
Leslie | 03.23.16 @ 16:06
I've seen a lot of commercials about this and wondered how it works. It seems like a great option for seniors so they can enjoy their retirement years more.
trish | 03.23.16 @ 16:06
My mother in law is currently looking for a new home so she can move out of my brother-in-law's house. This is great information to pass along to her. thanks!
Beverly | 03.23.16 @ 16:06
I've never understood reverse mortgages so this gives some great information I didn't know.
Jonathan | 03.23.16 @ 16:07
I don't care what you say unless you have no family a reverse mortage is bad news
Meredith L | 03.23.16 @ 16:09
This is a wonderful opportunity for people who are on fixed incomes and don't want to lose their home in their golden years. I would definitely speak with a financial expert about end of life arrangements and inheritance things when thinking about doing this.
Brittany | 03.23.16 @ 16:12
I have never heard anything positive when it comes to reverse mortgages.
dan | 03.25.16 @ 12:55
Nothing positive, Brittany? Almost ALL of the press about Reverse Mortgages is positive these days. See Forbes, Wall Street Journal, Kiplinger, Huffington Post, and more... all within the last week. The only correction I would make to the article is the last sentence. You do NOT have to turn the property over to the mortgage company. Continue living in it as long as you can. When you (or your heirs) sell it, you are protected by the non-recourse clause in the note, and will never owe more than the value of the home.
$commenter.renderDisplayableName() | 12.03.20 @ 12:50