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HECM for Purchase

Beginning on January 1, 2009, seniors became eligible to use a reverse mortgage to purchase a principal residence as part of HUD’s “HECM for Purchase Program.”

Definition (plain English)

HECM reverse mortgages are now available to seniors who would like to buy a new home if:
  • The youngest homeowner is age 62 or older
  • The purchased home will be primary residence
  • The purchased home will be occupied within 60 days of closing
  • No mortgage loan other than the HECM can be used to buy the purchased home
  • The difference between the purchase price of the home and the HECM proceeds must be paid in cash or from the sale of an existing home

Definition (formal)

HUD’s formal definition of the program, from the HUD Mortgagee Letter on October 10, 2008, is:
The HECM for Purchase is a real estate purchase where title to the property is transferred to the HECM mortgagor, which 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.