What Type of Down Payment is Needed to Buy a Home with a Reverse Mortgage?
Even though it has been around since 2009, the FHA’s program, Home Equity Conversion Mortgage for Purchase, or HECM, has only recently begun to gain popularity. This type of loan allows older Americans to buy a new home by putting a reverse mortgage on it. It is very attractive to quite a few older Americans because of its perks.
The HECM for Purchase lets individuals buy a new home and live there without making monthly payments as long as they live in the residence. The one main consideration is that a larger than typical down payment is required. Even with that, this option is proving to be attractive. Those who have retired and have more flexibility in regard to their living arrangements are discovering the possible advantages of the program. For example, it may pave the way for relocating to a new place that is more manageable, to a warmer climate or closer to friends and family.
As for the down payment total, it is determined by the age of the borrowers. The older one is, the less they will have to put down. Here are a few other points to consider with an HECM for Purchase loan:
- Eligibility requires that the borrower is a minimum of 62 years of age.
- Before taking out an HECM, they should either have a sizeable amount of equity in it or own the property outright.
- All expenses and fees associated with the home must be paid including property taxes, insurance and HOA dues.
- The home must meet FHA-imposed requirements and others such as basic code and flood standards.
- The home must be the borrower’s primary residence.
- The borrower can not have delinquent debt, federal or personal, as well as any liens on the property.
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Anyone leaning towards an HECM for Purchase will be pleased to learn they are available for more than just single-family homes! Other eligible dwellings include 2 to 4-unit properties, as long as one of them is the borrower’s primary residence. HUD-approved condos, manufactured and modular homes are allowed as well. Those wishing to use this type of mortgage for new construction will need an official certificate of occupancy.