HECM For Purchase Miami Florida

A reverse mortgage to purchase a property? How does it work?

A reverse mortgage purchase or HECM for purchase allows seniors age 62 or older to buy a new home with HECM loan proceeds. The primary benefit to the senior is that the transaction only involves one set of closing costs versus buying a home and obtaining a reverse mortgage thereafter, which would incur two complete sets of closing costs. Created by the Housing and Economic Recovery Act of 2008, this program went live on January 1, 2009. Qualified seniors must conform to all HECM requirements, all of the basic rules apply in addition to some new rules and regulations.

Exterior of large older brick home

What Are The Basics?

  • Can purchase existing 1 to 4-unit property
  • Property must serve as the principal residence
  • Once the HECM purchase is complete, no additional liens are permitted (Lender in 1st position, HUD in silent 2nd)
  • Must provide monetary investment at closing from an allowable funding source, see below for details
  • Must occupy property within 60 days of closing
  • Newly constructed properties must have a certificate of occupancy issued by the time the Home Equity Conversion Mortgage purchase loan is insured by FHA ('endorsed').

There are some differences between a HECM for Purchase and a Traditional HECM. The major differences concern the property types that are eligible, the cash required at closing, the involvement of a Real Estate Agent in the loan process, the recommendation of a professional home inspection, and certain closing costs.

There are guidelines regarding which properties are eligible for a Reverse Mortgage.

Miami, Florida HECM For Purchase

Eligible Properties

Same as federally-insured reverse mortgages or Home Equity Conversion Mortgage loans.

Ineligible Properties

  • Cooperative units
  • Manufactured homes (in certain circumstances they may be eligible)
  • Bed and breakfast properties, boarding houses

Selecting A Home For Purchase & Getting An Inspection

All seniors are strongly encouraged by HUD to get a home inspection from a licensed professional home inspector (This is suggested but not required)

  • Evaluates the physical condition: structure, construction, and mechanical systems
  • Identifies items that need to be repaired or replaced prior to the scheduled closing date
  • Estimates the remaining useful life of the major systems, equipment, structure, and finishes
  • Buyers should be at the inspection to ask questions about the condition and maintenance

Required Repairs

  • Health and safety or structural integrity issues
  • Must be completed prior to closing by the seller
  • Include in a purchase agreement
  • Buyer cannot put any money into repairs before they own the home

Writing An Offer

  • Must state offer contingent on a satisfactory inspection conducted by a qualified inspector
  • The borrower may want an attorney to review – increases costs but may be worth it
  • The client may cancel the transaction at any time prior to closing but this could affect earnest money deposit

Closing Costs

Standard HECM closing costs plus:

  • Recordation fees
  • Transfer taxes
  • Varies from state-to-state