HECM for Purchase


VIP’s Reverse Mortgage team has the answers to home buyers most frequently asked questions regarding Reverse Mortgages, HECM and H4P Loans.

HECM for Purchase allows seniors, age 62 and older, to purchase a new principal residence using loan proceeds from the reverse mortgage.

The program was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction by eliminating the need for a second closing.

Existing one-to-four unit properties where construction has been completed and the property is habitable. See ML 2007-06.

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.

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

  • Newly constructed residence where a Certificate of Occupancy or its equivalent has not been issued by the appropriate local authority;
  • Cooperative units;
  • Boarding houses;
  • Bed and breakfast establishments;
  • Existing manufactured homes built before June 15, 1976; and
  • Existing manufactured homes built after June 15, 1976 that fail to conform to the Manufactured Home Construction Safety Standards, as evidenced by affixed certification labels (e.g., data plate and HUD certification label) and/or lack a permanent foundation as required in HUD's Permanent Foundations for Manufactured Housing Guide.

Yes Prospective mortgagors may only use the following sources of funds: sale of a home, savings or a gift. No seller, realtor or lender concessions.

A withdrawal from the mortgagor's savings or retirement account would be an acceptable funding source.

Yes This would be a violation of 24 Code of Federal Regulations 206.32(a), which requires all outstanding obligations connected to the HECM transaction, purchase or otherwise, to be satisfied prior to or on the date of closing

No Seller concessions are applicable to forward mortgages only.

No Consistent with existing policy, bridge loans and other interim financing methods associated with HECM transactions are prohibited, unless the unpaid or outstanding obligation can be satisfied prior to or on the day of closing.

Yes Although one spouse will become the HECM mortgagor, the lender must obtain the credit report for a review of financial obligations, monetary judgments and liens that could jeopardize the HECM lien status/clear and marketable title.

The senior may decide to cancel the purchase transaction at any time prior to the date of closing. If the senior decides to cancel the transaction, he/she must notify all parties in writing. Where earnest money has been provided, the senior should review the sales contract to determine if the earnest money is refundable. The Federal Reserve Board of Governors should be contacted for right of rescission and Truth in Lending Act guidance.

No When purchasing a new principal residence, the HECM mortgagor has 60 days to occupy the home. Unlike a forward mortgage, there is an increased risk to FHA when the home is not occupied by the HECM mortgagor. Prior to closing, the HECM mortgagor and seller should agree to a date for physical occupancy of the property and the lender should confirm occupancy prior to their submission of the case binder to the local HOC for endorsement.

The title company (settlement agent) is responsible for disbursing funds in accordance with State law.

No FHA has sufficient valuation guidelines related to comparable sales and declining markets to address the resale of foreclosed properties. HUD has imposed a standard of accountability to which lenders, sponsor lenders, and loan correspondents will be held is the same as the standard used to impose civil money penalties for program violations, and that standard is one of knowing (actual knowledge) or had reason to know.

No. FHA encourages all first-time homebuyers to meet with a reverse mortgage counselor that offers pre-purchase counseling to educate themselves on the responsibilities of becoming a homeowner. Prior to signing a sales contract, FHA encourages a home inspection of all properties that will serve as collateral for HECM for purchase transactions. The inspection serves two purposes, to determine the magnitude, if any, of repairs and/or rehabilitation the home as well as helps the buyer to negotiate the purchase price in situation where a home requires repair or rehabilitation.

VIP Mortgage has Certified Reverse Mortgage Professionals (CRMP), specializing in helping older borrowers convert a portion of the equity in their home into cash flow. Call [first [last today at [phone to learn more.


Contact Chad Roberts