HECM for Purchase Loans (H4P)

What is a HECM for purchase?

Seniors age 62 or older can leverage a HECM to purchase a new principal residence by using loan proceeds from a reverse mortgage. For example, if you sell your present home for $200,000 and want to relocate to a retirement home that is valued at $250,000, an HECM for purchase gives you the ability to purchase that house.

Here's how it works. Let's say that you qualify for an HECM loan for 50% of the value of the new home ($125,000). By leveraging this loan, you only have to pay the remaining $125,000 from the $200,000 sale of your home, leaving you with $75,000 in whatever interest bearing account you choose, a new $250,000 home, and no monthly payment.

Why was the H4P introduced?

The HECM for purchase program, was designed to allow seniors to purchase a new home. The program was also designed to enable senior homeowners to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs, i.e., handrails, one level properties, ramps, wider doorways, etc.

Can a HECM for purchase be used to satisfy outstanding payment obligations associated with a land contract?

Yes, if the property will be used as collateral for the HECM and the mortgage will be held in fee simple, or on a leasehold under a lease for not less than 99 years which is renewable, or under a lease having the remaining period of not less than 50 years beyond the date of the 100th birthday of the youngest mortgagor.

Can a lender take application on a property that is under construction and not habitable?

No. The lender may only take application once the Certificate of Occupancy or its equivalent has been issued.

Are set asides for repairs allowed?

To be eligible for federal insurance, the property must meet FHA minimum property requirements. All repairs to correct major property deficiencies that threaten the health and safety of the homeowner and/or jeopardize the soundness and security of the property must be completed by the seller prior to closing. Appraisers must complete the appraisal report as "Subject To" the completion of these repairs.