Dreaming of owning a new home? Maybe you’re caught up in the latest movie craze surrounding your favorite childhood doll and would like your own version of that nostalgic dream house. But consider this: a recent survey of American renters and homeowners found that 94% of people are not living in their current dream home.1 If you’re seeking a new home that’s an extension of your personality, you’re not alone! Fortunately, having a space that fits both your sense of style and your lifestyle doesn’t have to be just a dream – a reverse mortgage could turn your dream into a reality!
You may be familiar with reverse mortgages, but did you know you can use one to purchase a new home? The Home Equity Conversion Mortgage (HECM) for Purchase allows you to buy a home using proceeds from a reverse mortgage with no monthly mortgage payments, as long as you keep current with property taxes, insurance, and home maintenance.
And it’s not too good to be true: this financing option is designed to help you buy the home you’ve dreamt of while continuing to meet your financial and retirement goals. By using the equity from the sale of your current home or another source of funds, you can purchase your dream home and use the funds from the reverse mortgage to cover the remaining cost. More on that later!
What Does Your “Dream Home” Look Like?
Your dream home reflects your personal style, preferences, and aspirations. And while it’s probably not bright pink like a doll’s house, it may be a cozy cottage by the beach, a modern urban condo, or a spacious ranch-style house with a backyard ideal for entertaining. When you envision the perfect home for you, consider factors like location, climate, proximity to family and friends, recreational activities, and access to healthcare facilities. You may prefer the peace and tranquility of a rural setting, while others may gravitate towards the convenience and amenities of city life.
Maybe your dream home has “Aging in Place” features like an open-concept floor plan or a bathroom with a curbless shower. Perhaps it offers a primary suite on the main floor, or it simply requires less maintenance than your current space. If the home you live in doesn’t adequately support your lifestyle today and likely won’t meet your changing needs as you age, you can, of course, renovate. But renovations come with potential drawbacks – they can be a major investment, are often inconvenient, and, in some cases, can’t give you exactly what you need. Sometimes the answer is to make a move.
But what if your dream isn’t really about the home itself, but more so about the community it is situated in? A welcoming and vibrant neighborhood can provide a sense of belonging and support as we age. Could your dream home simply be in a different locale, perfect for accessing clubs or organizations that align with your interests? Or closer to loved ones who bring joy and comfort to your life?
Your dream home may be a bit out of your budget at the moment. If you’re in or approaching retirement, you may not have the same flexibility in your monthly budget you once had. Retirement planning and strategies can feel daunting and overwhelming, even with the help of professional advisors. If access to more cash could be a game-changer in securing your dream home, a HECM for Purchase might be the right move for your next move. And by clearly defining your dream, you can focus your search and increase the likelihood of finding a perfect match.
A Dream Loan for Your Dream Home
Let’s take a closer look at the HECM for Purchase. This loan is insured by the Federal Housing Administration and was designed specifically for those aged 62 or older. Unlike traditional mortgages, a HECM for Purchase allows you to purchase a new home without having to make monthly mortgage payments,2 making it an attractive option if you are looking to achieve your homeownership dreams on a fixed income. Instead, the loan balance is repaid when a maturity event occurs, such as when you permanently leave the home. The HECM for Purchase can help you turn your dream home into a reality without sacrificing your financial well-being as you age.
Beyond the main features we’ve covered already, a HECM for Purchase offers numerous benefits for homebuyers. Firstly, because there are no monthly mortgage payments required,2 it can provide you with financial relief and greater flexibility in retirement. Secondly, it allows you to accomplish two goals with a single transaction – buying a new home while securing a reverse mortgage. Many people like this option because it can help save money by reducing closing costs since a single loan is taken out. And ultimately, this can also make the home-buying process overall faster and easier for you.
Another significant advantage the HECM for Purchase offers is its ability to boost your buying power. For many of us, our dream home may be a bit out of reach, financially speaking. If you qualify, you can buy a home or FHA-approved condo as your principal residence by using proceeds from the sale of your current home or cash on hand to make a down payment (usually 60% to 65% of the cost of the new home).3 Then the balance of the purchase is covered by your HECM proceeds— and any remaining funds can be used as you choose.
Turning Your Dream into Reality
So, other than meeting the minimum age requirement of 62, what are some other qualifications when applying for a HECM for Purchase? You must plan to live in the home as your primary residence, and the home you purchase must also meet certain criteria – like being a single-family home or an FHA-approved condominium. Additionally, you’ll need to undergo a financial assessment to ensure you can afford to maintain the property and cover property taxes and insurance. Another added layer of protection for you is to complete a counseling session with a third-party, HUD-approved counselor who can help you determine if a HECM for Purchase is the right choice for you.
When it comes to applying for a HECM for Purchase, the process is relatively straightforward. First, you’ll need to find a lender that offers HECM for Purchase loans – like Longbridge Financial. Once you’ve selected a lender, you’ll need to provide documentation, such as proof of age. The lender will then evaluate your eligibility and determine the loan amount you qualify for. After approval, the loan closing process will take place, and you will be on your way to purchasing your dream home!
As with any financial product, it’s important to consider the potential risks that come along with a HECM for Purchase. It’s always recommended that you consult with a trusted financial advisor who can help you evaluate the risks and considerations specific to your situation before moving forward. Your loved ones should also be looped into the process – they can help you ensure the loan is in your overall best interest.
If you’re interested in taking the next step toward owning your dream home, contact our team today! We’d be happy to go over any questions you have and discuss the options available to you. And when you work with us, you can feel confident knowing that Longbridge is committed to going above and beyond to make your experience the best it can be.
