Can You Use a Reverse Mortgage to Buy a House?

Reverse mortgages are often sought after by seniors eager to tap into their home equity without restrictions. But can you use one to buy a house?

Today, I'll answer that question, and you’ll see if a reverse mortgage is a solution for seniors seeking a new home without monthly mortgage payments.

Can You Buy a House with a Reverse Mortgage?

Absolutely! You can buy a house with a reverse mortgage. But, you should know that you can’t use a regular reverse mortgage for this purpose.

There's a special program called Home Equity Conversion Mortgage for Purchase (or HECM for Purchase, if you like acronyms) made just for seniors.

With this program, you can use the money to buy your new house without stress, without having to sell your current one or worry about more monthly bills.

Now that you know there's a way to become a homeowner at retirement age, let's figure out how you can actually make the most out of this program in the upcoming sections.

What Is HECM for Purchase (H4P)?

If you've been checking out HECM for Purchase, you likely know a bit about reverse mortgages, right? But here's the thing, is HECM for Purchase different, or does it work the same way? Let's break it down and find out!

• To be honest they’re not very similar. To qualify for one, you'll need some cash upfront for the down payment, and there are closing costs too.

• But once you make the down payment, you receive the funds to buy the house and take advantage of the best reverse mortgage benefits, such as skipping those monthly mortgage payments.

• Your closing costs depend on the seller you choose. It's a good idea to shop around and talk to different sellers, especially after chatting with your reverse mortgage loan officer.

Apart from this, you don’t need to worry about making monthly payments like with a traditional mortgage. You still need to follow the rules, though, like living in the home as your principal residence, keeping it in good shape, and paying your property taxes and insurance on time.

Requirements for HECM for Purchase Program

If you want your profile to make a positive impression in front of your lenders, and get the approval for an HECM for purchase program, you need to

1. • ➙ Be 62 years or older.

   • ➙ Buy a home that will be your main residence.

   • ➙ Have a good credit and income record.

   • ➙ Pass a financial check to make sure the reverse mortgage will work for you.

   • ➙ Keep up with property taxes, home insurance, HOA fees, and regular home upkeep.

Reverse Mortgage Vs. HECM for Purchase: What’s the Difference

Now, let's compare a regular reverse mortgage with a HECM reverse mortgage for purchase to see what sets the latter apart from other reverse mortgage programs.

• Purpose

  While both types of reverse mortgages utilize home equity, HECM for Purchase specifically facilitates the purchase of a new home.

  Check the latest rates for H4P mortgages now!

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• Down Payment

  With regular reverse mortgages, there's no need for a down payment. However, if you're opting for the H4P program, be prepared to make a down payment.

• Payment Structure

  With a traditional reverse mortgage, borrowers receive monthly payments from the lender. In contrast, HECM for Purchase eliminates monthly mortgage payments, allowing buyers to use their existing home equity to finance the purchase of a new home.

• Eligibility

  HECM for Purchase is tailored for seniors looking to downsize or relocate to a new primary residence, offering a unique solution for those seeking to buy a new home without the financial burden of starting all over again with a traditional reverse mortgage.

List of Properties Eligible for H4P

If you're using H4P to buy a home, it has to meet certain property standards set by FHA. Here are the types of properties that qualify:

• Single-family homes (up to four units)

• Manufactured homes (built after June 1976)

• Condominiums

• Properties located in planned unit developments (PUDs)

• Townhouses

• New homes under construction with a certificate of occupancy (CO) issued at closing

Top 3 Reasons to Consider HECM for Purchase

Beyond large down payments and additional costs, here are a few reasons why seniors still like to go with an HECM for purchase.

• No Monthly Mortgage Payments

  ➙ This means you won't have to worry about paying a monthly mortgage bill, which can relieve a lot of financial stress.

  ➙ Without this recurring expense, you can allocate your money towards other important things, giving you more financial freedom and peace of mind.

• Less Strict Eligibility Requirements

  ➙ HECM for Purchase has more relaxed criteria compared to regular mortgages, making it easier for people to qualify.

  ➙ This means you may still be eligible even if you don't meet all the strict requirements of a traditional mortgage.

• Simplified Process

  ➙ With KreditSanta's HECM for Purchase, buying a home becomes easier and more straightforward.

  ➙ There are fewer financial hoops to jump through, making it easier for individuals even during retirement.

Reverse Mortgages for Home Purchase: Final Thoughts

If you're hesitating to buy a home in retirement because of financial concerns, don't worry! With the HECM for Purchase program, you can still make it happen. As long as you meet the requirements and your new home meets FHA standards, you can take advantage of this option.

It's a fantastic choice for seniors who want to own a home without dealing with monthly mortgage payments. However, before you decide, it's wise to talk to a reverse mortgage loan officer to ensure it's the best choice for you.