Purchasing a Home Using a HECM for Purchase in Tennessee: A Comprehensive Guide by Mortgage South 

For seniors in Tennessee seeking to purchase a new primary residence without the burden of monthly mortgage payments, the Home Equity Conversion Mortgage for Purchase (HECM for Purchase or reverse mortgage) offers a viable solution. This federally insured program allows homeowners aged 62 and older to leverage their home equity to buy a new home. Understanding the intricacies of this program is essential for making informed decisions.

What Is a HECM for Purchase?

A HECM (reverse mortgage) for Purchase is a government-backed reverse mortgage that enables seniors to purchase a new primary residence using the equity from their current home. Unlike traditional mortgages, HECM (reverse mortgage)for Purchase does not require monthly principal and interest payments. Instead, the loan is repaid when the homeowner sells the home, moves out permanently, or passes away. The Federal Housing Administration (FHA) insures these loans, providing a safety net for both lenders and borrowers.

Eligibility Requirements in Tennessee

To qualify for a HECM (reverse mortgage) for Purchase in Tennessee, applicants must meet several criteria:

• Age: The borrower must be at least 62 years
• Primary Residence: The new home must be the borrower’s primary residence, and they must occupy it within 60 days of closing.
• Financial Assessment: While there are no minimum credit score or income requirements, the borrower must demonstrate the ability to continue paying ongoing property charges, such as property taxes, homeowners insurance, HOA fees, and maintenance costs.
• Counseling: Completion of a counseling session with a HUD-approved reverse mortgage counselor is mandatory. In Tennessee, organizations like the Consumer Credit Counseling Service of Chattanooga provide this service.

Eligible Properties in Tennessee

Not all properties qualify for a HECM (reverse mortgage) for Purchase. Eligible property types include:

• Single-family homes
• 2–4 unit homes (if the borrower occupies one unit)
• FHA-approved condominiums
• Townhouses and Planned Unit Developments (PUDs)
• Manufactured homes (built after June 15, 1976, and meeting HUD standards)

Ineligible properties encompass:

• Cooperative units
• Boarding houses and bed-and-breakfast establishments
• Manufactured homes built before June 15, 1976
• Homes without a certificate of occupancy
• Properties with construction loans not yet paid off 

Financial Considerations

While HECM (reverse mortgage) for Purchase offers the advantage of no monthly mortgage payments, there are financial aspects to consider:

• Down Payment: Borrowers must contribute a significant down payment, typically ranging from 45% to 70% of the home’s purchase price, depending on their The older the borrower, the lower the required down payment.
• Closing Costs: These can include an upfront mortgage insurance premium (2% of the home’s appraised value), origination fees, appraisal fees, title insurance, and other third- party costs.
• Sources of Funds: Acceptable sources for the down payment include personal savings, proceeds from the sale of a previous home, or gifts from family members. Borrowed funds are not permissible.

Pros and Cons of HECM (Reverse Mortgage) for Purchase Pros:

• No Monthly Mortgage Payments: Freed-up cash flow for other
• Non-Recourse Loan: The borrower will never owe more than the home’s value at the time the loan is repaid.
• Flexible Disbursement Options: Loan proceeds can be received as a lump sum, line of credit, or monthly payments.
• Tax-Free Proceeds: Funds received are generally not taxable and do not affect Social Security or Medicare benefits.

Cons:

• Age-Based Loan Amounts: The amount you can borrow is influenced by your age, the home’s value, and current interest rates.
• Upfront Costs: Significant initial costs, including the down payment and closing
• Home Equity Reduction: Over time, the loan balance increases, potentially reducing the equity in your home.
• Property Obligations: Borrowers must continue to pay property taxes, homeowners insurance, and maintain the home.

Steps to Apply for a HECM for Purchase in Tennessee

1. Determine Eligibility: Ensure you meet the age, residency, and financial
2. Select a HUD-Approved Counselor: Complete a counseling session with an approved agency like the Consumer Credit Counseling Service of Chattanooga.
3. Choose a Lender: Research and select a lender experienced in HECM (reverses mortgage) for Purchase Mortgage South has helped more homeowners purchase homes with a HECM (reverse mortgage) than any other local lender.
4. Property Selection: Identify a property that meets eligibility
5. Application Process: Submit your application, including necessary documentation and proof of The experienced professionals at Mortgage South can guide you through the process easily.
6. Loan Processing and Closing: Upon approval, Mortgage South will be with you every step of the way to guide you through your closing with a local titles agency in the greater Chattanooga, TN or greater Nashville, TN areas.

Mortgage South: Your Trusted Partner in Tennessee

Mortgage South has been a pioneer in reverse mortgages in Tennessee, originating the state’s first reverse mortgage in 1993. With over 30 years of experience, Mortgage South has assisted more than 3,000 homeowners in Tennessee and North Georgia in utilizing their home equity to enhance their retirement. The company is committed to providing personalized service and expert guidance throughout the reverse mortgage process. (Reverse Mortgages In Chattanooga, Nashville, Knoxville TN., About Us – Mortgage South Reverse Mortgages )

Conclusion

A HECM for Purchase can be an excellent option for Tennessee seniors looking to purchase a new primary residence without the burden of monthly mortgage payments. By understanding the eligibility requirements, financial considerations, and steps involved, you can make an informed decision about whether this program aligns with your financial goals and housing needs.

If you’re considering this option, call Nathan Guerrero at Mortgage South, the local expert to explore how a HECM can help you purchase your dream retirement home.