FHA Loan Program for Seniors

Age 62+ Buy Your Retirement Dream Home and Never Make Another Mortgage Payment

If you’re retired already, or getting close to retirement age, you’re probably thinking about your future. I know I am.

Maybe you’re hoping to travel to all those places you’ve wanted to see but never had the time. Or maybe you’re hoping to move closer to your kids or grandkids. Maybe you’re just getting tired lugging your laundry upstairs, doing yardwork and home maintenance.

And maybe, like many seniors, your home is your biggest financial asset. You have been paying into it for years, kind of like a retirement piggy bank, but now the money you need to have the retirement you’re dreaming of is locked up in a home that no may longer meet your needs.

You want to move, but you’re worried that you won’t be able to afford that great single-level home, townhome or condo. Or, if you’re like me, you might be concerned that buying a new home you love will leave you feeling house-poor in retirement. 

FHA Mortgage Loans for Seniors

If you’ve been thinking about any of these things, I have some good news. The Federal Housing Administration, the FHA, has a loan program specifically for seniors that allows you to use the equity you have in your current home to purchase a new home, and you never have to make another mortgage or interest payment again, as long as you live in your home.

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It’s called the Home Equity Conversion Mortgage for Purchase Loan, sometimes referred to as HECM for Purchase loan or an H4P loan.

With an HECM for Purchase home loan, you can use the equity in your current home to by a new home that better meets your needs or lifestyle and have more money to enjoy your retirement. 

The HECM for Purchase loan isn’t just like a conventional mortgage. It’s a type of reverse mortgage that is insured by the FHA.

Here are some of the benefits of a HECM for Purchase Loan.

You are not required to make monthly mortgage or interest payments on your loan for as long as you live in the home—no matter how long you live there.

You will never be at risk of foreclosure as long as your pay your property taxes and insurance and maintain your home.

A HECM for Purchase loan can also give you greater purchasing power than a traditional mortgage, especially if you’re already retired, because qualifying for a mortgage on your retirement income and savings alone can be more challenging than when you were working and earning.

Buying a home with an HECM for Purchase loan is a lot like buying with cash except  you’ll have more cash in your pocket to do all those things you’ve been dreaming about.

Other Advantages of a HECM Purchase Loan

With a HECM for Purchase Loan, you (or your heirs) always maintain title to your home.

The FHA guarantees that as long as you meet your loan obligations (which include maintaining the home and paying for property taxes and homeowners insurance), no repayment of the loan is required until the last borrower moves out or passes away. 

Any equity remaining the time the home sold belongs to you or to your estate.

Extra Protection for Your Spouse or Partner

One of the biggest benefits of a HECM loan is the protection it offers if you or your spouse or partner needs to move into long term care.

When that happens, it can often result in a significant loss of income for the person who remains in the home. 

With a HECM for Purchase loan, the remaining spouse/partner will not have to make a mortgage or interest payment as long as he or she continues to lives in the home. That may make the difference between staying in the home or having to move.


HECM Loan Requirements

There are some additional requirements when purchasing with a HECM loan. 

You must be age 62 or older.

You will need to put down a substantial larger downpayment

Two older women sitting on a couch looking at something

than with a conventional home loan, 40 to 65 percent of the purchase price depending on your age, the interest rate, and the value of the home you’re buying.

Many people use the proceeds from the sale of their current home for their downpayment, but you can also use funds from any other qualified source, including saving or retirement funds.

While you don’t have to make monthly mortgage or interest payments on an HECM loan, you do have to pay your property taxes and insurance, and keep up with home maintenance. (You can keep making mortgage payments if you so choose.)

Interest will continue to accrue on the unpaid balance of your loan, just like a regular mortgage.

The HECM for Purchase loan isn’t the right option for every homebuyer, but it does offer more financial flexibility, security, and protection for many seniors.

If you’re looking for more information about buying a home with a HECM or Purchase loan, I’d be happy to connect you with a qualified lender. 

J Trout Lowen is a Twin Cities REALTOR® who specializes in helping homebuyers and home sellers navigate the Twin Cities housing market.

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