Reverse Mortgage Information for Purchasing a home
You CAN teach an old dog new tricks.
The “HECM for Purchase” (aka: “H4P”) program is a unique way to finance the purchase a home. It was designed by HUD in 2009 to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction. The HECM for Purchase was also designed to enable senior homeowners to relocate to other geographical areas in order to be closer to family members or “right-sizing” to homes that meet their physical needs (handrails, one level properties, ramps, wider doorways, etc.). Regardless of your reasons for moving, you can use a Reverse Mortgage to assist.
Prior to 2009, HUD did not allow people to purchase homes with Reverse Mortgages. Seniors actually used to purchase the home with a Conventional mortgage (or paid cash) and then had to apply a few days later for the Reverse Mortgage. Unfortunately, they were subjected to closing costs twice.
Because the H4P is still a relatively new way to finance few home buyers and Realtors are even aware that it exists. In 2013, a national survey of 1,100 Realtors, only 12 Realtors (or 1.1%) knew details about the H4P financing option. Why don’t Realtors know about the H4P program? Remember, compared to traditional financing, it is relatively new; the first H4P transaction only closed in June 2009. Given the fact that few companies specialize in the Reverse Mortgage program, the HECM for Purchase continues to be unknown.
This page is dedicated not only to the aging population that Colorado Reverse Mortgage serves, but to the Real Estate Brokers, Builders and other respected peers in the real estate industry. Our aim is to educate everyone and to show that there is a new way to buy a home.
WHY CONSIDER A HECM FOR PURCHASE?
Consider the following scenarios in which you are buying a home, have $250,000 in cash to spend on your new home and your #1 objective is that you DO NOT want a house payment. (The numbers are only meant for illustrative purposes; the older you are, the less down payment is needed).
You have 3 choices:
- You buy a $250,000 home and pay cash for it.
- You buy a $250,000 home; put $125,000 down; finance the remaining $125,000 with a reverse mortgage. You still have $125,000 cash in your bank account as a nest egg for your future use.
- You buy a $500,000 home; put $250,000 down; finance the remaining $250,000 with a Reverse Mortgage
Buying a new home can be much more affordable if you allow yourself to think outside the box. All three of the above options accomplish your primary goal of not having a monthly house payment! In the past, most seniors and their Realtors failed to consider the exciting second and third options listed above. Only you can decide which of the three options works best, but now you know about a new source of purchase money financing that does not require monthly Principle and Interest payments.
Colorado Reverse Mortgage urges you and your Realtor to meet with us prior to shopping for a home. We’ll give specific numbers and other important details about the process. The Policies and Guidelines for a HECM for Purchase do have nuances and there is a specific process to purchase a house using a Reverse Mortgage that you both need to be aware of.
Colorado Reverse Mortgage makes every assurance that everyone involved in the real estate transaction understands how the program works. We developed a web-page as a resource for Realtors and Builders to use at the beginning of a transaction (click link below). If you are a senior buying a home, we’re glad you’ve read this page and have a little deeper understanding. You can rely on us, your real estate agent, broker and/or builder to handle the details and keep you informed throughout the process.
To learn more, I recommend going to the HECM for Purchase page on our site for a deeper education.
Colorado Reverse Mortgage… Helping you move forward, in Reverse.