HECM for Purchase in Florida: A Different Way to Buy Your Next Home

A HECM for Purchase may be worth considering when an eligible homebuyer wants to:

• Downsize or choose a home that better fits their current lifestyle
• Move closer to family, healthcare, activities or a preferred community
• Purchase a newer or more accessible home
• Avoid using all available assets to buy entirely with cash
• Reduce required monthly principal-and-interest payments compared with traditional financing
• Sell an existing home and use a portion of the proceeds toward the next purchase

It is not automatically better than paying cash or using a traditional mortgage. The right comparison depends on the home, available funds, expected length of ownership, costs, responsibilities and broader financial plan.

There is no single down-payment percentage that applies to every HECM for Purchase.

The required monetary investment depends on factors that include:

• The age of the youngest borrower or eligible non-borrowing spouse
• Current interest rates
• The home’s purchase price and appraised value
• The FHA HECM limit in effect
• Closing costs and financed charges
• Any required property-charge set-aside
• The amount of HECM proceeds available

In general, the buyer should expect to contribute substantially more than the minimum down payment associated with many traditional purchase loans.

Acceptable funds may include cash and verified proceeds from the sale or liquidation of eligible assets, including proceeds from selling a current home. All funds must come from acceptable, documented sources under current FHA and lender requirements.

What it may provide

• A way to purchase a new primary residence
• No required monthly principal-and-interest payment
• Continued ownership and title in the buyer’s name
• An alternative to paying the entire purchase price in cash
• FHA mortgage-insurance protections

What it does not remove

• The buyer’s required upfront investment
• Property taxes and applicable assessments
• Homeowners and required flood insurance
• Maintenance and repair responsibilities
• Primary-residence and occupancy requirements
• Appraisal, financial assessment and underwriting
• Closing costs, interest and mortgage-insurance costs

The new home must be an eligible property that will become the borrower’s primary residence.

Eligible property categories may include certain single-family homes, owner-occupied two-to-four-unit properties, townhomes, approved condominiums and qualifying manufactured homes.

Not every property qualifies. Condominiums, manufactured homes, properties needing repairs and other property types may require additional review or may be ineligible.

Confirm property eligibility before relying on a HECM for Purchase in a purchase contract.

Before obtaining a HECM for Purchase, borrowers must complete counseling with an independent HUD-approved reverse-mortgage counseling agency (opens in a new tab).

The counseling session covers how the loan works, its costs, alternatives, homeowner obligations and the effect the loan may have on the borrower, spouse and estate.

The lender also completes a financial assessment to determine whether the borrower can continue meeting property-tax, insurance, maintenance and other required obligations.

HUD can also help locate an approved counselor at 800-569-4287.

A HECM for Purchase does not require monthly principal-and-interest payments, but the homeowner must continue to:

• Live in the home as their primary residence
• Pay property taxes
• Maintain homeowners insurance and flood insurance when required
• Pay applicable condominium or homeowners-association charges
• Keep the property in good condition
• Complete required occupancy certifications
• Follow the other terms of the loan

Important: Failure to meet these obligations can cause the loan to become due and payable and may lead to foreclosure.

Earlier is better.

A HECM for Purchase is financed—not a cash purchase—and should be discussed before a buyer writes an offer.

Early planning gives the buyer, mortgage professional and Realtor time to review:

• The expected buyer investment
• Counseling and financial-assessment requirements
• Acceptable sources of funds
• Property and condominium eligibility
• Appraisal requirements
• Contract dates and financing contingencies
• Any seller or interested-party contribution allowed under current FHA rules

A buyer’s eligibility does not guarantee that a particular property will qualify.

The home and the financing need to work together.

I help buyers and their families compare a HECM for Purchase with paying cash, using traditional financing or choosing another mortgage strategy.

We will review the expected investment, ongoing responsibilities, costs and property requirements before you rely on the program in a purchase contract.

I can also coordinate with your Realtor so everyone understands the financing structure and important milestones.