Why Use a Reverse Mortgage to Purchase a Home?
A Reverse for Purchase can provide more flexibility when deciding where and how you want to live during retirement. Rather than using all of your available cash to purchase your next home, you may be able to preserve a portion of those funds for other needs.
Downsize Without Paying All Cash
Sell your current home and use a portion of the proceeds toward a new home while keeping more of your available funds.
Relocate Closer to Family
Move closer to children, grandchildren, healthcare, or the community where you want to spend your retirement years.
Increase Your Purchasing Power
Combining your available funds with reverse mortgage proceeds may allow you to consider a home with features or in a location that might otherwise require using substantially more cash.
Preserve Retirement Assets
Instead of putting all available savings or sale proceeds into your next home, you may be able to retain additional assets for retirement expenses, emergencies, travel, or other financial goals.
Eliminate Required Monthly Principal & Interest Payments
A Reverse for Purchase does not require monthly principal and interest mortgage payments while the loan remains in good standing.
What Kind of Home Can You Purchase?
A Reverse for Purchase is designed for a home that will become your primary residence. Depending on the reverse mortgage program and property eligibility requirements, eligible properties may include:
Single-Family Homes
FHA-Approved Condominiums for HECM transactions
Certain Condominiums that may qualify through FHA Single-Unit Approval
Eligible 2–4 Unit Properties, provided the borrower occupies one unit as the primary residence
Eligible Manufactured Homes that meet applicable program and property requirements
Certain properties eligible under proprietary reverse mortgage programs
This is another reason your Reverse for Purchase review is important. A property or borrower that doesn't fit the FHA-insured HECM program may have a proprietary reverse mortgage option available.
I can compare the available programs based on the borrower, property, purchase price, desired cash contribution, and overall financial goals.
Your New Home Must Be Your Primary Residence
A Reverse for Purchase is intended for a home you will occupy as your primary residence. It is not designed to finance an investment property or vacation home.
The Reverse for Purchase Process
From Offer to Closing
A Reverse for Purchase follows many of the same steps as a traditional home purchase, but there are additional reverse mortgage requirements. Planning for those requirements early can help keep the transaction moving smoothly.
1. Review Your Purchasing Power
Before making an offer, we determine the approximate reverse mortgage proceeds available and estimate how much cash you may need to bring to closing.
2. Complete Reverse Mortgage Counseling
For an FHA-insured HECM for Purchase, the borrower completes counseling with an independent HUD-approved housing counseling agency. Counseling should be addressed early in the process so it doesn't delay the transaction.
3. Make an Offer on Your New Home
Once you understand your estimated purchasing power, you can work with your Realtor to locate the right home and prepare the purchase contract.
4. Complete the Loan Application
We complete the reverse mortgage application and collect the documentation required for the loan program.
5. Appraisal & Property Review
The property is appraised and reviewed to make sure it meets the requirements of the reverse mortgage program being used. Any required property issues may need to be addressed before closing.
6. Underwriting
The lender reviews the borrower, property, financial assessment, available funds, and required documentation to determine that the loan meets program guidelines.
7. Final Cash to Close
Before closing, you'll receive the final amount you need to contribute toward the purchase, along with the applicable closing documents and disclosures.
8. Closing & Your New Home
Your funds and the reverse mortgage proceeds are used to complete the purchase. You take ownership of the property and move into your new primary residence.
Because a Reverse for Purchase has requirements that differ from a traditional mortgage, it's helpful for the buyer, Realtor, loan officer, title company, and other parties to understand the financing from the beginning.
