Reverse mortgages were originally created to help homeowners, particularly retirees. stay in their home. However, it’s now possible for borrowers to purchase a new home under the Federal Housing Administration’s (FHA) Home Equity Conversion Mortgage (HECM) program.
The FHA HECM program was introduced in 2009 to allow borrowers to use the proceeds of a reverse mortgage to buy a new primary residence in a seamless transaction. This is a cost effective way to downsize housing expenses or relocate to a new location. This type of transaction will generally provide the borrower with a fixed-rate, lump-sum loan that’s applied to the purchase of the new home
When considering qualifying for the FHA reverse mortgage program, you must meet the following requirements:
2-4 unit homes with one unit occupied by the borrower
HUD approved condominiums
FHA approved manufactured homes
Homeowners should consider this option if they are looking to downsize or relocate. You must be able to afford a down payment, but it can come in the form of a gift from friends or family. It’s important to note that although you don’t need to own an existing property or sell your existing home to qualify, you will be required to occupy the new home as your primary residence.