Page 4 - AAG126_HECM for Purchase Booklet for Real Estate Professionals

How is it Different?

With a traditional mortgage, a homebuyer typically makes a down payment and monthly mortgage payments (principal
and interest) thereafter until the lender is repaid.

A HECM for Purchase requires only a down payment at the time of the homebuyer’s purchase. The amount of the
purchase price financed by the lender does not have to be repaid (principal and interest) until the buyer sells,
permanently moves out of the home, passes away, or does not otherwise comply with the loan terms. Both types of
mortgages require that the borrower maintain the property, pay property taxes, and homeowners insurance.

If you have clients looking to finance a new home purchase without taking on monthly mortgage payments, share how a
HECM for Purchase can help them accomplish their goal. In addition, HECM program guidelines were put in place by the
United States Department of Housing and Urban Development (HUD) to protect borrowers and further strengthen the
HECM loan product.

1. FINANCIAL ASSESSMENT: 2. NON-BORROWING SPOUSE: 3. MORE AFFORDABLE OVER
HUD now requires a more Loan amounts are available TIME: The upfront and
thorough evaluation of to borrowers with a non- annual mortgage insurance
a borrower’s ability and borrowing spouse under the premiums (MIPs) were
willingness to meet the age of 62. Rules allow the standardized by the FHA to
obligations of his/her HECM eligible spouses of borrowers bolster the reverse mortgage
reverse mortgage loan. who pass away to stay in the loan product. As of Oct. 2,
home without foreclosure, as 2017, the upfront MIP was set
long as the surviving eligible at 2% of the appraised value
spouse complies with the of the home and the annual
loan terms. MIP was reduced from 1.25%
to 0.5% of the outstanding
mortgage balance. (On a
$200,000 balance, 1.25% is
$2,500 vs $1,000 for 0.5%.)