LHFS Wholesale
HECM for Purchase Training
Home Equity
Conversion Mortgage
Great Rates. Great Programs. Great Service.
Discover the HECM for Purchase Loan
• The HECM for Purchase Program is a Federal
Housing Administration (FHA) insured home
loan. It allows individuals age 62+ to buy a
primary residence using a reverse mortgage.
• Most borrowers need to plan on bringing
50% to cover down payment and closing
costs. (Less for the older borrowers)
Benefits
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No income qualifying
No credit qualifying
Gifts for down payment allowed
No monthly payments required
Flexibility - treat as a normal mortgage and
make payments monthly, annually or
intermittently.
Eligibility Requirements
• Must be 62 or older
• Receive a Counseling Certificate prior to
application (Current address on the cert)
• Live in the home as primary residence
• No seller, agent or lender credits or
concessions of any kind.
• Property types: single family, approved condo,
2-4 units, permanently affixed manufactured
homes
• Quote and obtain an engineering cert for
manufactured homes.
IMPORTANT EXCEPTIONS
• If the borrower wants to retain their existing
primary residence, then we have to do “limited”
income qualification.
• Using the PITI and HOA dues on the existing
primary AND the taxes, insurance and any HOA
dues on the new home, they must debt ratio at
approximately 50-55% (exceptions may be
granted)
• No other debts are included in the ratio and no
potential rents are included on the retained
primary.
• BK, Short Sales and Foreclosures need to be
seasoned one year on a HECM for PURCHASE (If
Government loan, then 3 years seasoning will
apply)
Benefits For Realtors
• Sell more homes to the growing Baby Boomer
and Greatest Generation segment of the
population
– over 77,000 are turning 62 every week in the US
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Make home buying more affordable
Convert individuals from renters to homebuyers
Improve your marketing reach
Two transactions in one (Sell existing, buy new)
Appeal to investors that need cash flow
Help clients take advantage of the market and
buy their future home now!
Purchasing Power Without
Monthly Mortgage Payments
• With $250,000 investment, a 70 year old can
afford…
$250,000 Home
Purchased in Cash
or
$500,000 Home
Purchased with a HECM for
Purchase Loan
Scenario 1
Current home
No equity and would need
to deplete retirement to
purchase a smaller home
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Retired couple with
strong monthly income
4000 square foot home
did not fit their needs
anymore
Solution
Reverse Mortgage
Purchased a home on a golf
course, only diminished their
retirement account a few
hundred thousand –
maintained lifestyle
Scenario 2
Pay All Cash
$600,000 did not buy the
quality of home in the
neighborhood she desired.
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Single Woman in
her 60’s
Income dropped and
rapidly depleting her
portfolio
Downsized and sold
home for 2 million,
netted just
over$600,000
Or
Reverse Mortgage
Put 300k down on Condo in
a downtown high rise left
with over 300k to replenish
some of the lost retirement
account
Scenario 3
On wife’s income
Could only qualify for a
rather small mortgage, so
their purchasing power only
got them a 300k home.
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Couple would like to
purchase first home
after 28 years of
renting.
Husband retired, wife
would like to retire but
could not if they had a
mortgage.
Saved $200,000 for
down payment.
Or
Reverse Mortgage
They could purchase a
beautiful home at $475,000
and they are not using all of
their savings
Scenario 4
Current Home
Mortgage on his home was
less than 50k. Did not want
to take money permanently
from his primary to invest.
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Real estate investor.
Owned his home nearly
free and clear.
Always struggled to
find and qualify for
financing for his
investment properties.
Bought homes thru his
LLC, rehabbed them
and then flipped them.
Solution
Reverse Mortgage
Paid off his existing first and
then put the other $320k
into a line of credit to
repeatedly acquire houses.
Scenario 5
Current Home
3400 sf, huge yard, pool and
spa and extremely high
maintenance.
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Single woman in with a
high end home in Del
Mar, CA.
Substantial income, but
concerned with the fact
that she would need to
downsize in 2- 3 years.
Did not want to sell in
the depressed market.
Did not want to have to
wait to buy in an inflated
market .
Solution
Reverse Mortgage
on her primary and she used
the cash to purchase her
“future” home at a hugely
discounted price. She put
renters into the new home.
CHARGES AND FEES
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Buyer pays for Seller’s title and transfer tax
Buyer and Seller may split escrow
Buyer must pay for home warranty if desired
Seller must pay for and complete agreed
upon repairs prior to close of escrow
• Escrow may not charge separate “junk fees”
• Buyer or seller may pay for termite report
• Borrowers on both refinance and purchase
must pay for their own counseling!!
ESCROW AND TITLE
• Recommend using an escrow that knows
how to transact a HECM for Purchase
• Control the transaction- Talk to the agents
and let them know this will be the most
seamless process if they allow you to direct
them to an experienced escrow.
• Remind the listing agent that the buyer is
covering a large portion of the seller’s costs.
• Process once counseled can be 30-45 days
ESTIMATED AND FINAL HUDS
• Remember the “closing” is considered the
date the application is signed
• The estimated HUD must be accurate –
educate the escrow officer; very minimal
reduction in fees is allowed…no increase.
• Look at the estimated HUD, talk to the
escrow officer, don’t accept estimates.
• Recommend borrowers “wire in” their funds.
• Watch for undisclosed credits…taxes and
HOA prorations are acceptable.
FINALLY
• Remember to educate both the listing and
buyer’s agents; they will be a wonderful
referral partner for you if they have a good
experience
• A well-done purchase should leave a very
positive “wake” for everyone involved.
• Remember to control the expectations of
your borrower; they need to document funds
just like a “regular loan”
It’s An Easy Process
• DON’T BE AFRAID, JUMP IN AND SWIM, THE
WATER IS GREAT!!
SEE YOU IN ESCROW!!
LHFS Wholesale
HECM for Purchase Training
Home Equity
Conversion Mortgage
Great Rates. Great Programs. Great Service.
Please note that all information is provided on this web site for informational purposes only, for the exclusive use of licensed mortgage professionals, and not for the general public. This information does
not represent an offer or commitment to enter into a loan agreement by Land Home Financial Services Wholesale Division (LHFSW). Not all programs are available in all areas and rates and costs stated do
not apply to all loans made. LHFSW’s underwriting guidelines and program restrictions apply. Terms and programs listed are subject to change without notice. LHFSW only conducts business in states
approved to. LHFSW is a Division of Land Home Financial Services and is an Equal Housing Opportunity Lender. Click here for complete licensing information - Company NMLS #1796.