HECM for Purchase Changes – Big Reverse Purchase Change Coming

HECM for Purchase Changes – Not everybody is aware that you can buy a home with a HECM for purchase reverse mortgage loan.  That being said, this short article is not meant to educate you about a HECM for purchase loan.  We’ll do that on a separate post.  At this point we’re just highlighting some hecm for purchase rules changes coming September 19th, 2017.

HECM for purchase changes
HECM for purchase changes

Reverse Purchase Background Before We Discuss the HECM for Purchase Changes

First, we’ll provide a little background before we actually discuss the big HECM for purchase change.  It’s pretty common for a buyer’s real estate agent to negotiate some sort of seller concession for their buyer. It’s also pretty common for a seller’s real estate agent to structure a deal that includes a seller concession to the buyer.  As buyers and sellers move through the negotiation process, it’s a good way to entice an almost ready buyer to be an actual buyer.

Almost every type of financing available allows the seller to offer a buyer a seller concession.  This is true of USDA loans, VA loans, conforming loans, proprietary product loans, and FHA loans.

Even though the HECM / Reverse Mortgage is an FHA insured loan, for some reason there were no seller, lender, or broker concessions allowed on a Reverse Mortgage Purchase.  This was one of the biggest reverse mortgage cons associated with the hecm for purchase rules.  Further, a broker credit or lender credit IS allowed on a standard reverse mortgage that’s not being used to buy a home.

The Big HECM for Purchase Rules Change Coming in September 19th, 2017

Finally, on January 19th, 2017 HUD published in the Federal Register the Final HECM Rule, FHA Strengthening the Home Equity Conversion Mortgage Program.  I won’t highlight all the changes.  I’ll just highlight the HECM for purchase changes that are relevant to this post.

The most promising reverse purchase change is that seller contributions or concessions are now allowed.  The exact details outlining how much can be credited have yet to be released. However, it’s likely to parallel what’s allowed with a traditional FHA purchase loan.

Potential HECM for Purchase Rules (Rule) Changes

Currently there is a HECM for purchase rule in regard to the certificate of occupancy. The rule states you must receive a certificate of occupancy for any newly built home before applying for a loan.  This isn’t necessarily the end of the world, but it can throw off some desired timelines for buyers, sellers, and agents.  This may change and become more lax, but for now, that rule remains.

If you’re a real estate agent, A HECM for purchase won’t always work.  However, it’s definitely something to consider for certain clients.  Think of a cash buyer that’s relocating and / or downsizing, etc..  If they don’t have to put ALL their cash into the home purchase, they may be able to buy more house.  Or, they just simply might have more options in terms of your local inventory.

For home buyers, it means that you can keep more money in reserves rather than dumping it all in your home.  At the same time, you can enjoy not having a monthly mortgage payment just as if you paid all cash.  However, you CAN make a payment if you WANT.  If gives you total control.  Not bad I must say!

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