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HECM for Purchase is a subprogram of the FHA’s Home Equity Conversion Mortgage Program. It helps senior citizens (of 62 or older) to buy a new main home using the money from a reverse mortgage. The idea behind this program is to allow older homeowners to have the funds to buy a new home and get a reverse mortgage in one transaction. This helps to reduce the total cost (already high for a reverse mortgage) and accelerate the processing time. It also helps senior citizens to relocate to another area closer to their family or friends, or allows them to downsize their home to a more manageable size that fits their needs. Some homeowners will also use HECMs to finance the installing of ramps, handrails, walk-in baths and other support systems in a new home.
One of the attractions of a HECM for purchase loan is customers can opt for a fixed rate loan. This helps borrowers budget more carefully the cost of a reverse mortgage and predict the buying-out cost if they decide to sell their home.
If you are interested in buying a HECM for Purchase reverse mortgage you will need to compile a list of documents and forms, some of which are not required for other types of mortgages.
As with all mortgages you will need to authorize a credit report so the FHA and your lender can assess your reliability as a borrower. However, you will also need to authorize a credit report for your spouse even if he or she is not signing the HECM reverse mortgage. This is done to check the financial obligations and other mortgages a spouse may have that could affect the lien status of a HECM.
60-day Physical Requirement
HECM for Purchase borrowers must start living in the new home as their principal residence within 60 days of buying the reverse mortgage. Although it is the job of the lender to document and prove to the FHA borrowers are living in the home, it is worth understanding this requirements because your lender might require proof of residence from you.
Seniors can use a HECM for Purchase reverse mortgage to buy one-to-four unit properties which have been totally completed and are habitable according to local laws. For instance, a newly constructed house without a Certificate of Occupancy or its local equivalent would not be eligible for a HECM for Purchase reverse mortgage.
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