Discover the HECM for Purchase: A Smart Way to Buy Your New Home in NH
Are you looking to purchase a new home with cash or a large down payment? Please consider a HECM for Purchase (Home Equity Conversion Mortgage for Purchase)—it might be the ideal solution for you. If you’re 62 or older, this unique loan option allows you to buy a new primary residence using a reverse mortgage to finance it—without any mandatory monthly principal and interest mortgage payments!
At Bookend Lending LLC, Renee Duval is here to guide you through every step of the process. Whether you're looking to downsize, move closer to family, or simply enjoy a fresh start, we’ll help you navigate the world of reverse mortgages and make your homeownership dreams a reality.
What is a HECM for Purchase?
The HECM for Purchase program allows seniors to purchase a new home using a reverse mortgage. This loan option combines the benefits of a reverse mortgage with the advantages of buying a new property in a single transaction. It offers a streamlined process, saving you from paying closing costs twice—once for buying the home and again for securing a reverse mortgage.
Since its introduction in 2009 under the Housing and Economic Recovery Act, this HECM for Purchase program has been helping retirees live more comfortably in better-fit homes, with no monthly principal & interest mortgage payments. Of course all homeowners are responsible for taxes, insurance, utilities, homeowner association fees, when applicable, and maintenance. Most Seniors who use the HECM for purchase program sell their current home and use the proceeds from that sale to purchase the new home.
How Does It Work?
- Eligibility: Seniors aged 62 or older are eligible, provided they meet the standard reverse mortgage requirements.
- No Monthly Payments: You won’t need to make monthly mortgage payments—making it easier to manage your finances during retirement.
- One Set of Closing Costs: Save time and money by only paying closing costs once—this includes both the purchase of the property and the reverse mortgage.
What are the Basic Requirements?
- Primary Residence: The property must be your primary home.
- Property Types: You can purchase single-family homes, 2-4 unit properties, or even a newly built home. FHA-approved (or approvable) condominiums and manufactured homes built after June 15, 1976 that sit on their own lot are eligible.
- Down Payment: You’ll need to provide a substantial down payment at closing, which can come from allowable sources such as savings or proceeds from the sale of another home.
- Occupancy: You must move into your new home within 60 days of closing and live in it more than 6 months per year.
- Property Eligibility: The property must meet the same requirements as it would for any other FHA loan.
The Key Benefits of HECM for Purchase
- Simplified Process: One loan application, one set of closing costs, and a streamlined approval process.
- Stay in Control: Maintain your independence with no required monthly mortgage payments. You can choose to make voluntary payments or not, as you see fit.
- Flexibility: Choose a home that best fits your needs—whether it's downsizing to a smaller property or finding a home with room for family and guests.
- Qualify for More: Most homebuyers find they can get more home for the same cash outlay as compared to paying cash or using traditional financing.
What You Need to Know: Property Guidelines
Not all properties are eligible for a HECM for Purchase. Here’s what you need to keep in mind:
Eligible Properties:
- 1-4 unit properties that will be your primary residence
- Single-family homes with an ADU (accessory dwelling unit) or in-law apartment
- Newly constructed homes
- FHA-approved or approvable condominiums
- Manufactured homes built after June 15, 1976, that are on a permanent foundation (slab foundations are okay if they have the proper tie-downs)
Ineligible Properties:
- Cooperative units (in most cases)
- 5 unit properties
- Bed and breakfast properties, boarding houses, or properties used for business purposes
- Manufactured homes in parks and mftr homes built before 1976
Home Inspections:
While not required, HUD strongly recommends that you have a licensed home inspector evaluate the property’s condition. This can help identify potential issues—like health and safety concerns or structural repairs—that may need to be addressed before closing.
Repairs:
If the appraiser notes any health, safety, or structural issues, they may require you to have a home inspector verify if a repair is needed, or the seller may need to complete the repair before closing.
The Steps to Buying a Home with a HECM for Purchase
Consult with a Reverse Mortgage Loan Officer: If you’re a senior buying a home in NH, please reach out to Renee Duval for a consultation on how a reverse mortgage might work for you. It’s nice to have a local person in NH who lives and works here you can talk to.
Complete Counseling: Phone counseling (cost is about $150) is required for all homebuyers using a reverse mortgage. The counseling certificate is good for 180 days. It’s good to have it completed before finding a home because counseling must be completed before an appraisal can be ordered.
Connect with a REALTOR: There are many REALTORS in NH who understand the unique needs of seniors. In fact, some are designated as Senior Real Estate Specialists® (SRES). Whether designated or not, a REALTOR who understands the merits of using a HECM for purchase is a friend in deed!
Find Your Dream Home: Choose a property that fits your lifestyle and needs. Your reverse mortgage loan officer can give you firm numbers on any specific home you’re considering to purchase and can work collaboratively with you and your REALTOR.
Make an Offer: Once you’ve found the right property, your reverse mortgage loan officer can provide the needed prequalification statement to go with your offer. It is possible to close within 30 days (sometimes even faster), but note that counseling must be completed before the FHA case number and appraisal can be assigned, so delays in completing counseling could affect your closing time.
Get a Home Inspection: We recommend a professional inspection to ensure the home is in good condition.
Complete Your HECM for Purchase Application: Once your offer is accepted, provide the sales agreement to us, and we’ll complete your loan application and provide all required federal and state disclosures. We’ll guide you through the process step by step.
Get Cleared to Close: cleared to close are the magical words all homebuyers, sellers and REALTORs love to hear. This means you have satisfied all conditions of your approval and can now schedule your closing! Our team will work with you to make this happen as quickly as possible!
Homeownership Responsibilities: After closing, principal & interest mortgage payments are voluntary; you don’t have to make a payment! But remember, as a homeowner, you’re always obligated to pay taxes, insurance, utilities, association fees and maintenance.
Common Questions About the HECM for Purchase Loan
What Is The Monetary Investment Requirement?
At closing, HECM borrowers must make a down payment to satisfy the difference between the HECM principal limit and the sales price for the property. The down payment is based on the age of the youngest borrower and an estimated 6% interest rate. Here’s an example:
- Age 62: 65% down payment
- Age 70: 59% down payment
- Age 75: 56% down payment
- Age 80: 52% down payment
In addition to the down payment, buyers must pay closing costs and prepaid expenses like on any other loan. The HECM also has a 2% upfront mortgage insurance premium (MIP), based on the sales price, slightly higher than the 1.75% MIP for traditional FHA loans.
Can I Put More Than the Minimum Down?
Yes! Borrowers may make a larger down payment than required. This is called "overfunding" the loan. When you make a larger down payment than the minimum, the starting loan is below the principal limit, and, if you chose an adjustable rate mortgage, the difference becomes a line of credit that you can access in the future. Overfunding helps lower your loan balance and can give you more flexibility down the road.
HECM Line of Credit
If you are considering overfunding your HECM, and you’re purchasing a home in NH, let’s talk! Lines of credit are a fabulous retirement tool and a great way to manage your equity.
Do I Need to Sell My Current Home First?
You do not need to sell your current home first unless you need the proceeds to purchase the new property. If you have sufficient assets and income, you can carry both mortgages and close on the new purchase before actually selling your current home.
What Are Allowable Funding Sources?
- Withdrawals from savings or retirement accounts
- Proceeds from the sale of other property
- Seller credits (contributions) up to 6% of the sales price can be used to offset closing costs.
Is a HECM for Purchase Right for You?
If you’re ready to buy a home—whether you're downsizing or relocating—the HECM for Purchase can make your transition easier and more affordable. With no monthly mortgage payments and the ability to purchase a home using the equity you’ve built up over your lifetime, this option provides greater financial flexibility in retirement.
