You may be familiar with the Home Equity Conversion Mortgage (HECM) or reverse mortgage program, which allows homeowners over age 62 to stay in their current homes while drawing on the equity. But did you know you can also use a HECM to buy a new home?

For seniors looking to right-size or relocate in retirement, a HECM for Purchase (H4P for short) could be a viable option. With prime homebuying season just around the corner, now is the time to start doing research and planning for your purchase, including selling your current home, finding a new home, and processing your HECM application.

Requirements for a HECM

The first step in the process is to ensure you meet the borrower requirements. To qualify for an H4P, you must be 62 years of age or older, have no delinquencies on federal debts, and plan to occupy the new home as your primary residence. You also need to be able to pay applicable property taxes, homeowners insurance, and homeowners association fees over the life of the loan. Before applying, you’ll need to participate in a consumer counseling session with a HUD-approved advisor to ensure you understand the full terms and repayment options.

Entering the real estate market

In coordination with your reverse mortgage loan originator, you can begin the initial phase: selling your current home. Ultimately you will use the equity as the down payment for your new reverse mortgage. Working with an originator from an experienced lender like Open Mortgage, you can be confident that the sale of your home will be synced with the underwriting of your new reverse mortgage.

Be sure to allow yourself plenty of time to make the necessary updates and repairs to place your home on the market. A local real estate agent can advise you on the average number of days it historically takes to sell homes comparable to yours.

In the meantime, you also will want to start researching and visiting properties that meet your new needs, whether you’re looking to downsize, find a more open floor plan, or relocate to a warmer climate. Starting early can help you make an informed, unhurried decision.

Purchasing your New Home

When you have a home in mind for purchase, you can continue progressing in the H4P application process. The average process takes about 30 to 45 days from start to finish, including appraisal, application review, and underwriting. It is important to have a responsive lender who is well-informed on the H4P requirements to guide you on your way to enjoying your retirement on your terms.

Open Mortgage is here to help. Our loan officers are available to answer your questions and help you put a plan in place today.

Things to know about Reverse Mortgages:
  • At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
  • Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees
  • The loan balance grows over time and interest is charged on the outstanding balance
  • The borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home
  • Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment
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