8193 / Can a HECM be used to purchase a new home?

Yes. Known as the HECM for Purchase, this program was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction.

This program has been available since it was originally introduced as part of the Housing and Economic Recovery Act of 2008, yet has only recently started gaining popularity.

The Federal Housing Administration (FHA) defines “HECM for Purchase” as a real estate purchase where title to the property is transferred to the HECM mortgagor, where the mortgagor will occupy as a principal residence, and, at the time of closing, the HECM first and second liens will be the only liens against the property. HECM mortgagors must occupy the property within 60 days from the date of closing. Lenders are required to ensure all outstanding or unpaid obligations incurred by the prospective mortgagor in connection with the HECM transaction are satisfied at closing.