Downsizing with a HECM for Purchase: Opening the Door to an Untapped Market

Posted: June 1, 2022

Older homeowners may find themselves in a home that doesn’t quite fit their retirement needs. Whether it’s too spacious for upkeep or in neighborhood they’ve outgrown, they may be looking for a new home to live out their best years.

If you have older clients who are homeowners looking to “right size”, offer them a flexible financing option for the home they really want. A Home Equity Conversion Mortgage (HECM) for Purchase is a type of reverse mortgage loan that can help you meet the varying needs of your clientele while gaining a competitive advantage in your market!

With the flexibility of reverse mortgage purchase financing, older homeowners

can combine a one-time investment of their funds with loan proceeds to buy a new home or condo. The best part? Monthly principal and interest payments are optional, so your clients can maximize their cash flow and increase their buying power as you turn more shoppers into buyers.* 

The ABCs of a HECM for Purchase

A HECM for purchase is available to borrowers age 62 or older, so they can retire comfortably in a home that best suits their needs.

·       Offers loan amounts up to $970,800

·       Created in 2009 and federally-insured

·       Requires a down payment of 45% to 62% — depending on borrower age — and down payment cannot be borrowed funds

·       New home must be primary residence

·       Includes single-family homes, FHA-approved condominiums, townhouses or Planned Unit Developments (PUDs), and manufactured homes meeting HUD guidelines

 

There’s also Equity Elite® for Purchase

The Equity Elite® for Purchase financing option was designed for borrowers as young as age 55 in select states.**

·       Offers loan amounts up to $4 million for higher-value homes and condominiums

·       Requires a down payment of 55% to 75% of the purchase price (could be as low as 42% for older clients)§

·       Available for more condominiums, since FHA-approval is not required

·       The Equity Elite® ZERO product offers a lender credit to be applied toward most closing costs# and allows seller concessions of up to 6% of the sales price toward origination fees and other closing costs

 

Ready to grow your business with reverse mortgage purchase financing? Call your Account Executive today to get started.  




*As with any mortgage, the borrower must meet their loan obligations, keeping current with property taxes, insurance, and maintenance.
**Available to borrowers as young as 55 in select states only. Higher minimum age requirements may apply. Visit www.reversefunding.com/equity-elite for details.
Not applicable in all states; MA imposes a maximum loan amount of $2MM. Visit www.reversefunding.com/equity-elite for details.
§ This down payment range assumes closing costs will be financed into the loan.
# Excludes state-specific mortgage tax fees and/or title transfer fees. With this pricing option, borrower receives a lender credit covering nearly all closing costs. There is a non-refundable independent counseling fee of approximately $125 on average, which the borrower pays directly to the counseling agency. Terms and conditions apply. Not available in all states.
Equity Elite Reverse Mortgage (“Equity Elite”) is Reverse Mortgage Funding LLC’s proprietary loan program, and it is not affiliated with the Home Equity Conversion Mortgage (HECM) loan program, which is insured by FHA. Equity Elite is available to qualified borrowers who also may be eligible for FHA’s HECM program or are seeking loan proceeds that are higher than FHA’s HECM program limit. Equity Elite currently is available only for eligible properties in select states. Please contact your loan originator to see if it is currently available in your state.
Upon a maturity event, any non-borrowing individuals with an ownership interest in the property, including non-borrowing spouses, will have a short period of time (for example, 30 days from a due and payable letter or an alternate time specified by the loan servicer if extensions are available under the circumstances) to purchase the property from the estate or, if the non-borrower inherits the property, pay the loan in full using any sources of funds available to them. Any non-borrowing individual, including a non-borrowing spouse, should have a plan to pay off an Equity Elite reverse mortgage upon the borrower’s death or any other maturity event. If the non-borrower is unwilling or unable to purchase the property or pay the loan in full, there is no protection for the non-borrower (including a non-borrower spouse) to maintain an interest in the home or to continue residing in the home past the maturity event and the non-borrower may be evicted upon foreclosure. The FHA HECM program has protections in place for certain non-borrowing parties, so a reverse mortgage applicant with certain non-borrowing parties should strongly consider a FHA-insured HECM loan (see HECM guidelines or ask an RMF representative for details).  Under the Equity Elite reverse mortgage loan program, a maturity and/or default event occurs when the last surviving borrower no longer lives in the home as his or her primary residence for at least 12 months, the property charges (including taxes, insurance, or any other property charges) are not paid, required repairs are not completed or the property is not maintained, or any other maturity and/or default event, as specified in the Security Instrument, occurs.