Seniors: Purchase a New Home With No Monthly Mortgage Payment
Rodney Monroe
September 10, 2009
Bill and Alice of West Chester, Pa recently used a new reverse mortgage program called a HECM for Purchase to buy a three unit investment property. The couple in their 70's sold their existing home which had a $1,300 a month mortgage payment, and used the funds from a reverse mortgage to purchase the investment unit. Now they have no mortgage payment to make and rental revenue from two units to boot. Life is good.
Purchasing a new property with the funds from a reverse equity loan was always possible but required multiple transactions. The HECM Purchase program is designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction. And according to the HUD website 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.
Eligible Property Types
Existing one-to-four unit properties where construction has been completed are eligible. The property must be habitable as evidenced by local jurisdiction issuance of certificate of occupancy or its equivalent.
If you're wanting to purchase a property that's currently under construction then you'll need to wait until the Certificate of Occupancy or its equivalent has been issued.
Funding
Prospective borrowers may use their own money or money obtained from the sale of assets (previous home, boat, car, etc.). HUD publishes a 46 page document explaining which funds can be used. You can read it but I think it's a lot easier to just remember that you can not get the money from the following sources:
You can find detailed information about reverse mortgages, and even have a HUD approved lender contact you by visiting the website at How Do Reverse Mortgages Work.
Purchasing a new property with the funds from a reverse equity loan was always possible but required multiple transactions. The HECM Purchase program is designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction. And according to the HUD website 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.
Eligible Property Types
Existing one-to-four unit properties where construction has been completed are eligible. The property must be habitable as evidenced by local jurisdiction issuance of certificate of occupancy or its equivalent.
If you're wanting to purchase a property that's currently under construction then you'll need to wait until the Certificate of Occupancy or its equivalent has been issued.
Funding
Prospective borrowers may use their own money or money obtained from the sale of assets (previous home, boat, car, etc.). HUD publishes a 46 page document explaining which funds can be used. You can read it but I think it's a lot easier to just remember that you can not get the money from the following sources:
- Sweat Equity
- Trade Equity
- Rent Credit
- Cash or it's equivalent from the following parties is not allowed
- The seller or any other person or entity that financially benefits from the transaction or...
- Any third party or entity that is reimbursed, directly or indirectly, by any of the parties described in the previous bullet.
You can find detailed information about reverse mortgages, and even have a HUD approved lender contact you by visiting the website at How Do Reverse Mortgages Work.
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