What is the cash investment requirement for a HECM purchase loan?

The principal limit will be calculated according to current requirements for Home Equity Conversion Mortgages (HECM).

The borrower must provide a cash investment equal to the difference between the HECM principal limit and the property sale price, plus any loan related fees that are not financed into the loan, minus the amount of the earnest deposit.

Borrowers may choose to provide a larger investment amount in order to retain a portion of the available proceeds for future draws.

To assist with the calculation, Mortgagee Letter 09-11 provides examples of the required investment calculation.

HECM Mortgagee Letters are located at: https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee

For additional information see the Federal Register 24 CFR ยง206.44 at: https://www.govinfo.gov/content/pkg/FR-2017-01-19/pdf/2017-01044.pdf

 


All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-02010