Home Equity Conversion Mortgage (HECM) for Purchase

Many homeowners plan to purchase a new home to enjoy during their retirement years. For some, the idea of a perfect home may be one that is closer to the family. For others, it may mean downsizing to a smaller home or finding a place that better suits their lifestyle. Regardless of their reasons for moving, many homeowners are un-aware that a Home Equity Conversion Mortgage (HECM) is a unique option available only to adults over 62 that provides flexibility when purchasing a new home. Often referred to as a HECM for Purchase, this program can play a strategic role in financial planning and help homeowners live better in retirement.

Purchase a New Home While Maintaining Your Retirement Planning GoalsMore and more homeowners over 62 are choosing to use a HECM to help finance a home purchase and meet their retirement goals. A HECM can be an excellent option to consider if you want to:

• Relocate to be closer to family members• Downsize to a home that better suits your needs• Upgrade to a dream home for retirement• Move to an active adult community

Most importantly, a HECM for Purchase offers you more options for funding the purchase of your new home and planning for retirement. It may also provide you with supplement income or a growing line-of-credit to be used in the future.

General Eligibility Guidelines

Homeowners must meet the following initial criteria to be eligible for a Home Equity Conversion Mortgage (HECM):

1. 62 years or older2. Plans to use the new home as their primary residence within 60 days of closing3. Is not deliquent on any federal debt4. Has the ability to pay property taxes and homeowners insurance annually5. Agrees to maintain the home in good condition6. Participates in a counseling session with a government-approved counselor

Willow Bend Mortgage Company 5800 W. Plano Parkway, Suite 105, Plano, TX 75093 | www.wbm.com | (972) 818-1666 | NMLS #117371

How It WorksWhen obtaining a HECM in conjuction with a new home purchase, the purchaser may buy the home utilizing a mix of HECM loan proceeds along with the proceeds from the sale of their previous home and or savings to complete the transaction. The example below illustrates how the HECM for Purchase program could work for a 62-year-old home-owner named Carl who is downsizing to a smaller home.

When Carl sells his current home, he uses the proceeds of the sale to pay off the existing lien of $100,000, leaving him with $300,000 in equity, part of which can be combined with the proceeds of the HECM to purchase his new home.

When buying a new home with the HECM for Purchase program, Carl receives $110,000 in HECM proceeds, which could be applied to the sale price of the home as well as the $10,000 in closing costs. Carl contributes the remaining monetary investment needed for purchase from the sale of his previous home.

In this example, following the completion of the purchase, Carl would have approximately received $200,000 remain-ing from the sale of his first home and would not have any monthly principal and interest mortgage payments. The figures above are examples only, and actual scenarios will vary based on factors including age of buyer, home price, interest rate and property location.

Remaining Liquidity After Purchase

$200,000

Current Home Value/Sale Price

$400,000

New Home Value/Purchase Price

$200,000 + $10,000 Closing Costs

Current home equity/sale proceeds

$300,000Existing liens

$100,000

Additional monetary invest-ment covered by proceeds of home sale

$100,000HECM proceeds $110,000

*All loans are subject to underwriting approval and additional terms and conditions may apply. Please ask your mortgage loan originator for details regarding this program.

While the idea of using the HECM for Purchase program to buy a new home may be new to you, this strategy can offer an alternative to a traditional mortgage.

The HECM for Purchase features may include:

• Financing that does not require monthly principal and interest mortgage payments

• Increased purchasing power, whether homeowners are planning to upsize or downsize

• Streamlined closing process, as buyers are purchasing a home and obtaining a HECM in one transaction

• Depending on the strategy selected, supplemental in-come or additional income options to support a better retirement, including access to a growing line-of-credit

Just like other mortgages, the HECM is a loan that must be repaid; however, unlike other mortgages the HECM does not require repayment until the homeowner:

• Sells the home

• No longer lives in the home as their primary residence or passes away

• Does not meet other terms of the mortgage (ex: regular home maintenance, payment of all property charges, taxes and homeowners insurance)

When the loan becomes payable, the HECM and any accrued interest and mortgage insurance must be repaid. However, it is important to note that because HECM’s are insured by the Federal Housing Administration, homeowners will never have to repay more than the home’s market value at the time of repayment.

• Borrower(s) finds a new home they want to purchase, makes an offer, and obtains a purchase agreement signed by all parties.

• Borrower(s) contacts Willow Bend Mortgage to begin the application process

• Borrower(s) schedules and obtains reverse mortgage counseling.

• Borrower(s) returns the signed and completed application package and counseling certificate.

• Appraisal, credit report, flood certification and title will be ordered.

• Required documents may include, but are not limited to, a certified purchase contract, income documents, source of funds documentation, etc.

• The processing team may ask for additional forms of documentation depending upon the trans-action specifics.

• Once all the required documents are received, the file will be submitted to underwriting.

• The file is underwritten and additional documentation may be requested by the underwriter.

• The processing team will obtain the additional documents.

• The additional documentation is returned to the underwriter for review and clearance.

• The closing is scheduled and the borrower(s) becomes the owner of their new dream home!

Navigating The Reverse Mortgage For

Purchase Process: