How does a H4P loan work?

With an H4P loan, people can take out a reverse mortgage and buy a new home in the same transaction. They then use the reverse mortgage loan to borrow 50 to 60% against the home equity of the new property to complete the purchase of their new home.

What is a HECM loan?

The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM), and is only available through an FHA-approved lender. The HECM is FHA’s reverse mortgage program that enables you to withdraw a portion of your home’s equity.

What are the requirements for a reverse mortgage?


  • All borrowers on the home’s title must be at least 62 years old.
  • You must live in your home as your primary residence for the life of the reverse mortgage.
  • You must own your home outright or have at least 50% equity in your home to be eligible for a reverse mortgage loan.

What does H4P stand for?

Home Equity Conversion for Purchase in Retirement (H4P)

How does HECM for Purchase work?

With the HECM for Purchase reverse mortgage, the borrower provides a down payment using the sale of the previous home or other savings. The equity earned through the down payment and the new home’s value is then used to calculate the reverse mortgage loan amount.

What is MI on FHA HECM?

The Mortgage Insurance Premium (MIP) is a fee paid by the borrower to the Federal Housing Administration (FHA), an agency of the federal government, to provide certain protections for both the lender and the borrower.

What are the bad things about reverse mortgage?

Putting Home Ownership at Risk. The fact that no payments must be made on a reverse mortgage as long as one homeowner remains living in the house is a major

  • High Upfront Costs. The fees on a reverse mortgage can be expensive.
  • Effects on Government Program Eligibility.
  • Heirs Get a Problem Rather Than Inheritance.
  • Why is a reverse mortgage a bad idea?

    But the truth is that there are a lot of reasons why a reverse mortgage is actually a bad idea. A reverse mortgage lowers the amount of equity you have in your home. Of course, your home could increase in value over the course of the loan which may cancel out the reduction in equity.

    How to get a mortgage preapproval?

    Supply Documentation The first step in the pre-approval process is filling out an application with your lender.

  • Agree To A Credit Check Applicants will also need to supply a social security number and agree to a credit check.
  • Wait For Pre-Approval
  • What are the rules for reverse mortgage?

    Therefore, the four most important borrower rules for reverse mortgages are as follows: You must be 62 years of age or older. You must own your home. You must own your home outright, or have a substantial amount of equity. You must live in the home as their primary residence. You must complete a financial assestment