Buy a Home Without a Monthly Mortgage Payment? Here's How — HECM for Purchase Explained

If you're 62 or older and thinking about buying a new home — whether you're downsizing, relocating closer to family, or just ready for a fresh start — there's a loan program most people have never heard of that could completely change how you approach that purchase.

It's called the HECM for Purchase, and in this episode, we're breaking it all the way down. I'm joined by [Guest Name], [Guest Title], and we walk through exactly how this FHA-backed program works, who qualifies, how much you actually need to bring to the table, and why so many buyers 62 and older are using it to buy their next home without a monthly mortgage payment.

We cover:

• What a HECM for Purchase actually is (and what it's not)
• Who qualifies and what the requirements look like
• How the numbers work — what you bring in, what the loan covers
• Common myths and misconceptions about reverse mortgages
• Real scenarios where this program makes a lot of sense

If you or someone you love is thinking about a move in retirement, this is an episode worth sharing.

Have questions? Reach out at www.edgegroupteam.com

Find Admiral Flunder Here:  www.fairwayreverse.com/admiral-flunder 

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Transcript

The Big Promise And Why It’s Real

Speaker 0:00

What if you could sell your current home, move into a brand new place, and never make another mortgage payment again? Would you believe me?

Speaker 4 0:08

No, because that's not possible.

Speaker 3 0:11

Watch this podcast to find out how

Dennis Day Co-Host 0:14

What if I told you that you could sell your current home, move to a brand-new place, whether it's for downsizing to a perfect retirement, stepping into your dream home, never making a monthly payment?

Judy Gratton Co-Host 0:29

That isn't a fantasy. It's a reality for people over 62 years old. Today, we're going break it down for you in plain English.

Dennis Day Co-Host 0:40

I'm Dennis Day with the Edge Group team.

Judy Gratton Co-Host 0:43

I'm Judy Gratton

Dennis Day Co-Host 0:45

Welcome to Getting Your Edge: How to Downsize Your Home podcast, brought to you by the Edge Group team and eXp Realty. Today's episode is one I've been excited about, Judy, because we're pulling the curtain off something called the HECM for Purchase, sometimes called H4P. And I will tell you that when I first learned about this product, I was blown away, because now I realize that many of our clients have been searching for this kind of tool that can let them make a move and not have a mortgage payment in a new home. many people didn't know this existed

Judy Gratton Co-Host 1:26

Same here, Dennis. I'm excited that we have Admiral Flunder here today from Fairway Mortgage, and he's going explain how this program works. Thank you so much, Admiral, for joining us today.

Admiral Flunder 1:38

Thank you. I love talking about the H4P, because I've seen firsthand how it can change lives. When I first heard about it thought it was too good to be true, and I was surprised how few people knew about it. When I talk about a change in people's lives, it can take someone who felt like their real estate options were limited, and open up a world of possibilities that they didn't know that they had.

Judy Gratton Co-Host 2:04

The words limited options really take on new meaning as you get older and you're not working Even if you have a great 401, it's scary. I am excited about, the possibilities that you're presenting to people today.

What HECM For Purchase Means

Dennis Day Co-Host 2:22

Admiral, let's start at the beginning because not every person knows what a HECM is. They may have heard of a reverse mortgage, but I'd like you to explain what a HECM is and how it's different than a reverse mortgage.

Admiral Flunder 2:36

One of the things that makes it unique... hECM stands for own equity conversion mortgage. We call it the HECM. This is, a federally insured loan program backed by the FHA, the Federal Housing Administration. It's been around since 1989, and most people associate it with the traditional reverse mortgage where a homeowner taps into their equity of a home that they already own to receive cash or income without making monthly payments.

Judy Gratton Co-Host 3:04

But that's not what we're talking about today. We actually did talk about that in an earlier episode, and a lot of people may be familiar with reverse mortgage. That is what a HECM is, but this is different.

Admiral Flunder 3:20

Yeah, Judy. What we call the HECM for purchase. We call it H4P, and it's a variation that allows a qualified homeowner who's 62 or older to use a HECM to purchase, a home. And they're not refinancing their existing home. What they're actually doing is purchasing a brand-new residence, with no required monthly mortgage payment going forward.

Dennis Day Co-host (2) 3:44

Okay. No required mortgage, monthly mortgage payment, I wanna make sure people understand what's that mean. So do they still own the home?

Admiral Flunder 3:52

It's like a conventional mortgage. They own the home.

Dennis Day Co-Host 3:57

Does the bank hold the lien on the property

Admiral Flunder 4:01

Your name, the person's name is on the title, and, the bank holds a lien just like

Ownership, Misconceptions, And Non-Recourse

Admiral Flunder 4:07

they do any mortgage. there is no difference. It is absolutely your home

Judy Gratton Co-Host 4:13

I know some people are thinking you're signing away your home, and you're going to lose it as a result of having a reverse mortgage, and that's not how this works, correct?

Admiral Flunder 4:24

not at all. that's a misconception, and unfortunately it's kept a lot of people from exploring this amazing tool, that is going genuinely benefit them. With the HECM, there is a loan balance that accrues over time, but the interest is added rather than being paid each month. The loan comes due when the borrower permanently moves out of the home or when the last borrower of a couple passes away. And at that point, the home is sold, the loan is paid off, and any remaining equity goes to the estate or the heirs just like a conventional mortgage.

Dennis Day Co-Host 4:59

So my next question is, if I'm not making payments, doesn't the balance increase, and eat up all my equity instead of growing the equity like a standard 30-year mortgage?

Admiral Flunder 5:14

one of the benefits is, interest does accrue on that balance. But, when we're talking about the amount of money necessary as a down payment, the combination of the interest less the appreciation, when we do our calculations and we look at what the appreciation's going be, in the Pacific Northwest, homes grow faster than the national average of 4%. when we do our computations, we're always going do it 4%. This is what's called a non-recourse loan, it's FHA insured. you or your heirs will never owe more than what the home is worth, at the time of the sale, and if that loan balance has grown to exceed the home's value, FHA absorbs the difference. We have a mortgage insurance premium that covers that. And so the home stands for the debt. Not the homeowner, not their heirs. The home stands for all of the debt, and most people don't know about that.

Judy Gratton Co-Host 6:12

So you're saying it, it's a federal insurance backstop, but to make that really clear, if you think about it, in any mortgage that you have, you're accruing interest on the mortgage anyway. And if you look at payment plans when you sign a mortgage, it shows how much interest you end up paying, which is pretty astronomical, it's painful to look at the end of your 15 or 30-year mortgage. Same thing is happening, you're just not paying it right now on a monthly basis. and so it's still there. we're hoping, our appreciation on average is, 6 to 7% in the Puget Sound region. But what he's saying is that if we had something happen like the economic crash where homes lost half their value and your home wasn't worth what you paid for it you don't owe the difference when the last one of you passes away, and that's another part we'll probably get into. it's the federal government's. you might walk away with zero. There is a risk of that. But if we're appreciating anywhere from 6 to 7% a year, and over the last few years, 25%? Your home is making money. Yes, you're paying interest on the mortgage. It's being attached to what you owe, but your family will still walk away with some money at the end, correct?

Admiral Flunder 7:41

And when we-

Judy Gratton Co-Host 7:42

jumped the gun there.

Admiral Flunder 7:42

if we look in terms of, not making that mortgage payment, we have some clients that will make a mortgage payment because there's a line of credit, and it's one of those things that sounds too good to be true. So if I make a $2,000 payment, not required, it's just something I decide to do because right now it's paying 6.875% and it accrues monthly. At that rate, I can put that $2,000 down. Five days later, I can take it out. it's not income because I'm borrowing my own money, but that's one of the benefits that surprises most people. I've had people cash out their emergency fund and stick it in that line of credit because like putting an ATM machine on their home and taking it, when they need it.

Qualifying Rules And HUD Safeguards

Dennis Day Co-Host 8:32

Then let's talk about who can qualify for this. What are the main requirements,

Admiral Flunder 8:38

just one of the couple has to be 62. Not both. The second thing is it must be your primary residence. you need to live in the home at least six months and one day per year. And you can only do the HECM for purchase on one home. Just one home. the third is what we call, a financial assessment. So a person needs to demonstrate the ability to repay their ongoing property taxes, homeowners insurance, and maintain the home. So the lender, what we look at is income, assets, and credit history. And we also have something that I may, maybe we'll get into a little bit later, But it's designed to sustain itself. So we're not going put a person in a position where they can't. So we do that assessment, it's just to make sure that there's enough reserves after they pay normal things like, insurance and so forth, that there's enough money available so if there was an emergency. all of a sudden the stove and it happened to me. Somebody hit a circuit and I was in a meeting, and, I said, "Oh, shoot, this is going cost me $2,500." Turns out actually it was, like, 4,000 to replace those. the point is in that financial assessment, we wanna be sure there's enough reserve funds so when that thing happens, appliances go out, you still have finances available so that you have no challenges making your property taxes and insurance payments.

Judy Gratton Co-Host 10:01

Okay. And that's the thing that I think in reverse mortgages people did not understand,

Admiral Flunder 10:07

Exactly.

Judy Gratton Co-Host 10:07

they were responsible for the property taxes and the insurance and the maintenance of the home, and they didn't pay them. the federal government can always foreclose on you. I think they make that very clear now- to people doing that. another question is that it's only tied to one person, not both people. So say your 62-year-old applicant passes away, what happens to the 58-year-old co-applicant or spouse living in the home? What happens to them at that point?

Admiral Flunder 10:41

we would classify that individual as a non-borrowing spouse. And so they're going be on the title. Now, because they're not 62, they would not be eligible for some of the benefits that the 62-year-old had. What we'll typically do in that instance is refinance it when that person is of age otherwise, it works like any other mortgage.

Judy Gratton Co-Host 11:04

So they're not going lose their home. They're not going to be forced out.

Admiral Flunder 11:07

They're not going be forced

Judy Gratton Co-Host 11:09

They're not going to be forced out. You're not making a payment. think about health insurance, and suddenly you've got a health problem that you hadn't planned on, and health insurance right now in this country is not that great. You're not making that house payment. That gives you access to funds to me, this is just a miracle. It's really a miracle product.

Dennis Day Co-Host 11:31

There's another safeguard that HUD has thrown in there, and that's the counseling part. Can you talk about that?

Admiral Flunder 11:38

So the counseling is just to be sure... and by the way, this is a third party. HUD he- hires these folks all over the country, and the critical thing is they just want to be sure that the borrower understands what they're getting into. This counseling is done by phone, and it can be anywhere from 30 minutes to an hour. But we cannot proceed until we're absolutely sure that they understand. and another reason that we have it is us over 62, we're a protected class, so this counseling is necessary to be sure that there's no elder abuse going on.

Judy Gratton Co-Host 12:17

that didn't used to happen with the reverse mortgages, if I recall. Correct? The counseling part of it?

Admiral Flunder 12:23

In the beginning the counseling was not there. Actually, let's keep going.

Speaker 12:26

Okay. right

What You Can Buy And How

Admiral Flunder 12:27

I think one of the questions we were curious about what type of homes can a person buy? Are there any restrictions on what they can buy? the answer is that you could do a single family residence. You can do a two to four unit, property where you occupy one unit. imagine purchasing using the HECM for purchase, buying a fourplex, and then you rent out the other three, and you utilize those individuals then are making a payment, and that payment then you can turn around and then put into your line of credit, or you can fund your grandchildren's college. Or you can travel those other five months and 29 days. But opens up a lot of options. There's also, condominiums. they have to be approved by the FHA, because it has to meet those standards. We want to be sure that if it's a condo, that the dues are being paid, and we also will do a manufactured home. Okay.

Judy Gratton Co-Host 13:28

In a park or on owned land?

Admiral Flunder 13:30

It has to be the land. Yes. You must own the land- and you can put a manufactured home on it.

Dennis Day Co-Host 13:36

So potentially someone living on Social Security and a modest, income, maybe a pension or a 401K could qualify.

Admiral Flunder 13:45

Absolutely. Because with not having a required mortgage payment, it leaves funds available to, more cashflow.

Dennis Day Co-Host 13:54

So walk us through, Admiral, about when someone has thinking, this sounds really great. What do I do? I wanna make a move. I'm interested in the H4P." What does it look like to the customer?

Admiral Flunder 14:09

The homeowner decides to sell their existing home. They list it, they accept an offer, and they go into closing. They receive their net proceeds from that sale, and after the real estate commission's closing costs and paying off the remaining mortgage balance, they're ready to move forward. So they're going identify their home. They're going reach out to you guys and say, "Hey, we- we found a home, and we wanna make an offer." So then you connect them with me so I can just do the quick financial assessment. Or you might call me, and you say, "Hey, these folks are looking at a $800,000 home. How much money are, w- would they need to put down?" so we can have that conversation. But the process is that they're going identify the new home that they wanna purchase. They'll come to me to do that application. Once everything is clear and we've done a financial assessment that says that, yes, they can move forward, then that's when the HUD counseling session takes place. And then after that, just like on any other mortgage, then underwriting has to go in and be sure. the main thing underwriting wants to be sure is that, the person... So when we talk about this is designed To be a successful mortgage, they are just going do a 24-month look back and be sure that individual, when they did... if they did have a balance on that home, they weren't late on a mortgage payment in 24 months, and that they paid their homeowners insurance. And if there was a HOA association, that they kept up with their dues. So at closing, they're going bring their down payment from their sale proceeds. the loan, is going cover the remainder. They move in, and there is no required mortgage payment. So there's this thing where folks... There's, the mantra, the Holy Grail is I'm going work for most of my life, pay my home off and retire. One of the reasons they wanna pay their house off, 'cause nobody wants a mortgage payment in retirement. And that's one of the reasons I love this H4P. I've had clients who have actually retired early because they took advantage of the H4P. They sold their existing home, bought a home that they didn't think they could ever afford, and they still had money left over to have the retirement of their dreams.

Judy Gratton Co-Host 16:17

H4P stands for HECM for purchase. The HECM loan for purchase. here's where everybody's going, "Okay, how much of a down payment do I need?" At what percentage does HECM contribute to the purchase price? How much of a down payment are we looking at- on a home, or does it vary?

Admiral Flunder 16:37

It varies according to age. the younger you are, that 62-year-old is going bring in considerably more than the 80-year-old. And some folks will say, "80-year-old? 80-year-olds don't purchase homes." With this H4P They do. Because they've been in their homes for a period of time, and it's nice. But, when they visit their kids or they visit somebody else, they're admiring all these new amenities, and they don't think about it for themselves because they thought they could first of all, we talk about that mortgage payment. They don't wanna get that mortgage payment. When they find out they can get an updated home, they're beside themselves because-

Judy Gratton Co-Host 17:12

I'm a little confused. Why is it, the younger person has to bring in more, than the older

Down Payment Examples And Cash Leftover

Judy Gratton Co-Host 17:18

person has to? Because

Dennis Day Co-Host 17:20

all right, let's look at those, HECM for purchase options here, or scenarios We got, three scenarios. we're going assume that across all three scenarios their current home value is $800,000. The interest rate at time of sale and purchase is about 6.5. Selling cost will equal about 6% or $48,000. The borrower's age is 68, and that the HECM to, that's incorrect. That should be 37%, correct, 37%. Okay. So the Hendersons, they have a model downsize. They currently own their home completely. They'll, get $800,000 in equity, and they're buying a retirement community home for 600,000. their home value is there. The new home is 600, with the closing costs, et cetera. It's going be $618,000 approximately. Remember, these are just hypothetical situations. what happens with you, could be completely different, and every single customer or, person doing this type of loan is going to have a unique situation. Their mortgage balance is zero, selling costs, net proceeds 752. The HECM loan is bringing 37% of the cost of the home at 223,800. the Hendersons' down payment will be 394. they'd have $358,000 approximately in cash.

Admiral Flunder 18:57

Yes.

Dennis Day Co-Host 18:58

Untaxable cash. Pretty cool scenario. Let's go to the Garcias. They have an $800,000 home They wanna buy a $750,000 home, so total cost would be 772. They had a mortgage balance of $100,000, so their equity is 700,000. Selling cost, 48,000. Net proceeds from the sale of their home, $652,000. The 37% loan is going bring $280,000. Their down payment's going be higher, because they don't have as much equity, so 492,000 down payment leaves them with about $160,000 in cash.

Judy Gratton Co-Host 19:40

I want you to think about that. That's cash you can put in your account, go traveling with. that's your money- Out of the sale of your home, and you have a new home, and you're not making any payments on

Dennis Day Co-Host 19:53

let's go to the Parks. $800,000 home. buy a $600,000 home. 618 total cost. Mortgage balance 300,000. Equity $500,000. Selling costs 48,000. Net proceeds from the sale of their home, $452,000. Their HECM loan brings 280. Their down payment, 492,000. Remaining cash is 18. Why do they have so much less cash than the other, buyers?

Admiral Flunder 20:28

Higher mortgage balance this is the example we talked about. They never imagined they could do anything. making mortgage payments, probably for the next 15, 20 years. and so we have to think about the additional cash flow. One of the beautiful things I love about this is we're helping folks that thought that they were, with all due respect, stuck.

Judy Gratton Co-Host 20:49

Stuck.

Dennis Day Co-Host 20:50

They were equity rich, cash poor.

Admiral Flunder 20:53

this really helps individuals. a lot of retirees my age, they're moving to be closer to their grandchildren. a lot of times they're moving, their kids' homes are more expensive than, more expensive neighborhoods. they're moving for with all due respect to Eastern Washington, the prices are lows. parents moving from Eastern Washington, the H4P is going give them a much better chance to have a home that's, similar to what they moved out of. It's going cost more, but the key thing is nothing changes in terms of their cash flow. They don't have a required mortgage payment. They're closer to the kids, and instead of making mortgage payments, they're making memories.

Judy Gratton Co-Host 21:35

you mentioned earlier how people wanna pay off their home so they don't have a payment. And so they pay off this home for 15 years or 30 years and here they have this home with no payment When they bought that home, they were probably in their 30s and those stairs were not a problem, and that great big backyard was not a problem to take care of, and now they're in their 60s, and there are so many other things they'd rather be doing besides taking care of this home that they've worked their entire life to pay off. this allows them to leave that home and go into the situation, whether or not it's closer to their grandchildren where they can do the things they want in their life, have some cash left over, and not make the mortgage payment, which was part

Best Use Cases, When Not To

Judy Gratton Co-Host 22:25

of their goal paying it off in the first place.

Dennis Day Co-Host 22:27

What are some of the things that they have done with this money?

Admiral Flunder 22:31

they've helped their own kids with a down payment for a home. One of the challenges here in the Pacific Northwest is the cost of homes, where it takes so much longer for them to save up a down payment. Parents didn't realize that they had an opportunity to help the kids now. this might sound morbid to some, but I would much rather give my kids with a warm hand instead of with a cold hand, while I'm alive, where I can see it. So I can see it, so I can feel it, so I can see that joy in their eyes. that's why I'm just so passionate about this, because folks are able to do things they didn't think it was possible. And they weren't many years ago, but now with the equity that folks have, built up, it gives them a lot more flexibility to do things they couldn't even dream about before they learned about this H4P.

Judy Gratton Co-Host 23:21

So can you tell me, with this HECM for purchase, are there situations where the H4P isn't the right fit?

Admiral Flunder 23:32

Where it might not make sense though, if this is not going be a home that they're going stay in for the next, at least 10 years, then maybe they should look at other options. But one of the main things, is to let folks know there's a possibility that they didn't dream of. Obviously the reason we're here today is to share some of these examples. As Judy said, it varies from person to person, but each person gave a little thought how nice it might be to move into a more updated home, newer kitchens, newer appliances, newer everything. And instead of taking that money and putting it into that old house and those old bones, they're going start with a fresher, newer home,

Judy Gratton Co-Host 24:15

the location that you wanna be in or the size of home that you want and the thing that is so frustrating to me is that so many people make a decision it's not right for them without ever asking. Ask. Find out so you can make an informed decision as to whether or not this particular loan would work for you. It doesn't cost anything to find out what the possibilities might be

Dennis Day Co-Host 24:43

we've been talking numbers, i'd like to make sure that people know exactly, what they're getting into, that they have to be 62, they have to own a home, have some equity. But, what is step one in the conversation with you?

Admiral Flunder 25:00

Step one in the conversation with me is, I really wanna talk about what the current living situation is. I wanna find out what's important in this new home they're considering now. obviously, you're the real estate professionals, so you're going talk about those kind of things. but typically it's a situation where it sounds too good to be true. And so People tell me that they can't believe it. In fact, to be frank with you, I've been in this industry now for six years. I came out of retirement 'cause when I found out about this, I thought, "I've gotta go out and share this information with seniors like me who've heard things about it." but my generation, our generation, and maybe we can tell our kids, if it sounds too good to be true so that's one of the things is we're out here educating you folks now so more and more people know there is possibilities that exist where they can get in the house that they never thought that they could. and not have a required mortgage payment.

Judy Gratton Co-Host 25:55

earlier, we had mentioned that they had to sell their house and close, and then go find a house and contact you. Is it possible for them to contact you and say, "This is what we think we wanna spend." Can they start the ball rolling before we find the house? even in today's market, homes are sitting on the market longer, they're not selling for less, and you don't want to lose the opportunity when you find the home because they have to go through the training and whatnot to get set up. Could they get prepared and then go find their home?

Admiral Flunder 26:29

Absolutely. Opens many possibilities, and that's the primary reason we're here. Obviously, we're in business, and we wanna do business, but what we're wanting to do is educate folks- about something That sounds too good to be true, but- that's why we're here today, to show you there is an option most have not considered. When, purchasing a home, you can pay cash. You can refinance. Put a down payment Or here's a third option that most don't have a clue about. And with all due respect to other realtors, only about 18% across the country are even familiar with this. that's one of the reasons I'm excited, because you guys are excited about it. That means more people are going be educated and know here's a possibility Because as seniors, cash flow is important, and so we wanna keep our cash flowing freely. We don't wanna take on another mortgage payment.

Preapproval, Next Steps, And Closing CTA

Dennis Day Co-Host 27:25

Okay. Any final words? Judy,

Judy Gratton Co-Host 27:29

We can help you in the Puget Sound Region. you and I currently have listings in Bellingham and Camano and, Long Beach, and so we're all over the place. And I know that Admiral has assisted people all over the place. if you've got questions in this area, reach out to us.

Speaker 27:49

At the Edge Group Team, edgegroupteam.com.

Admiral Flunder 27:52

let me just say one last thing. A person does not have to do a complete application. we don't need a lot of information to get a person pre-approved, That all comes later.

Dennis Day Co-Host 28:02

It's not going affect your credit score. They need to show how much equity they have,

Admiral Flunder 28:08

and then we can do a computation- in a very short period of time.

Dennis Day Co-Host 28:11

And Judy, you and I could do a market analysis Absolutely.

Judy Gratton Co-Host 28:15

Those are complimentary

Dennis Day Co-Host 28:16

you could find out, how much your-

Judy Gratton Co-Host 28:18

what your home is worth. Zillow and Redfin provide you with a market analysis that's an algorithm. It's based on everything around your home. They don't know what the interior looks like. They don't know what improvements you have. if you want a solid idea of what your home is worth, equity analysis is what you need, and that's something we can provide.

Dennis Day Co-Host 28:41

remember you have no mortgage payment, and you have to pay the taxes, insurance, and maintain the home to get this low, okay? That's it for this episode of Getting Your Edge: How to Downsize Your Home. I appreciate if you would share, join our YouTube channel, pass it on to a friend. if you feel that somebody could benefit from these, we'll put Admiral's, information in the, show notes so that you can find Admiral and us at any time. Thanks. Bye-bye.