source:
  type: guide
  id: hud-4000-1-ii-a-hecm-for-purchase
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — a. HECM For
    Purchase (04/10/2025)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — a. HECM
    For Purchase (04/10/2025).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-a-hecm-for-purchase-full
  canonical_id: hud-4000-1-ii-a-hecm-for-purchase-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — a. HECM For
    Purchase (04/10/2025)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — a. HECM
      For Purchase (04/10/2025)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'a. HECM For Purchase (04/10/2025) The HECM for Purchase program
      was designed to allow Borrowers to finance a new Principal Residence and obtain
      a HECM within a single transaction. Title to the Property must be transferred
      to the Borrower and the first and, if applicable, second liens are the only
      liens against the Property at the time of closing. HECMs to be insured under
      the HECM for Purchase program must be processed and underwritten in accordance
      with the requirements in Origination through Post- closing/Endorsement, except
      where noted otherwise in this section. i. Definition HECM for Purchase refers
      to a transaction where the Borrower uses the HECM to finance the purchase of
      an existing one- to four-unit residence where the Borrower will occupy one unit
      as their Principal Residence. Existing Construction refers to a Property that
      has been 100 percent complete for over one year or has been completed for less
      than one year and was previously occupied. New Construction refers to Proposed
      Construction, Properties Under Construction, and Properties Existing Less than
      One Year as defined below: • Proposed Construction refers to a Property where
      no concrete or permanent material has been placed. Digging of footing is not
      considered permanent. • Under Construction refers to the period from the first
      placement of permanent material to 100 percent completion with no Certificate
      of Occupancy (CO) or equivalent. • Existing Less than One Year refers to a Property
      that is 100 percent complete and has been completed less than one year from
      the date of the issuance of the CO or equivalent. The Property must have never
      been occupied. ii. Initial Application Processing The Mortgagee may take initial
      application either before or after the completion of HECM counseling. iii. Principal
      Residence Requirements HECM Borrowers may have only one Principal Residence
      at any one time. Current Borrowers that plan to sell their existing residence
      and use the HECM for Purchase program to obtain a new Principal Residence must
      pay off the existing HECM before the HECM for Purchase transaction can be insured.
      Borrowers and Eligible NBSs, if applicable, must occupy the Property within
      60 Days from the date of closing. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products
      - HECM For Purchase (04/10/2025) Handbook 4000.1 727 Last Revised: 11/26/2025
      iv. Initial Mortgage Insurance Premium Amount The Initial Mortgage Insurance
      Premium (IMIP) must be financed or paid in cash. Any IMIP amount paid in cash
      is added to the total cash requirements due at closing. v. Maximum Claim Amount
      (A) Definition The Maximum Claim Amount (MCA) is the lesser of the: • appraised
      value as determined by the Collateral Risk Assessment; • national mortgage limit;
      or • sales contract price. (B) Standard The Mortgagee must determine the MCA
      at origination. When the collateral risk assessment determines that a second
      appraisal is required, the Mortgagee must use the lower of the two appraised
      values. The IMIP must not be taken into account in the calculation of the MCA.
      Closing costs must not be taken into account in determining the appraised value.
      vi. Property Eligibility and Acceptability Criteria (A) Types of Eligible Properties
      The Borrower may finance the purchase of a one- to four-unit residence that
      will be used as their Principal Residence. The Property may be Existing Construction
      or New Construction. The following property types are eligible for HECM financing:
      • Site Built Housing (one- to four-units, one-unit with an Accessory Dwelling
      Unit (ADU), or two- to four-units); • Condominium units in Approved Projects
      or Legal Phases; and • Manufactured Housing (one-unit or one-unit with an ADU).
      Properties previously acquired through a contract for deed, land contract, or
      other similar arrangements must be treated as a purchase transaction when HECM
      funds will be used to satisfy outstanding payment obligations. For Condominium
      Units seeking Single-Unit Approval, see Property Eligibility in Single-Unit
      Approval. FHA treats the sale of an occupied Property that has been completed
      less than one year from the issuance of the CO or equivalent as an Existing
      Construction Property. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title
      II Insured Housing Programs Reverse Mortgages 8. Programs and Products - HECM
      For Purchase (04/10/2025) Handbook 4000.1 728 Last Revised: 11/26/2025 (B) Construction
      and Inspection Requirements for New Construction HECM Properties Mortgagees
      must ensure New Construction HECM Properties are inspected to ensure compliance
      with FHA’s MPS and MPR. The construction status at the time of appraisal will
      determine the inspections that must be completed. (1) Site Built Housing (a)
      Proposed Construction For Properties in the Proposed Construction status at
      time of appraisal, the Mortgagee must obtain one of the following prior to closing
      and provide the applicable documentation in the case binder: • copies of the
      building permit (or equivalent) and CO (or equivalent); or • three inspections
      (footing, framing, and final) performed by the local authority with jurisdiction
      over the Property or an ICC certified RCI or CI (for Modular Housing, footing
      and final only); or • in the absence of such ICC certified RCI or CI, the Mortgagee
      may obtain three inspections (footing, framing, and final) performed by a disinterested
      third party, who is a registered architect, a structural engineer, or a qualified
      trades person or contractor, and has met the licensing and bonding requirements
      of the state in which the Property is located. (b) Under Construction For Properties
      in the Under Construction status at time of appraisal, the Mortgagee must obtain
      one of the following prior to closing and provide the applicable documentation
      in the case binder: • copies of the building permit (or equivalent) and CO (or
      equivalent); or • a final inspection issued by the local authority with jurisdiction
      over the Property or by an ICC certified RCI or CI; or • in the absence of such
      ICC certified RCI or CI, the Mortgagee may obtain a final inspection performed
      by a disinterested third party, who is a registered architect, a structural
      engineer, or a qualified trades person or contractor, and has met the licensing
      and bonding requirements of the state in which the Property is located. (c)
      Existing Less than One Year For Properties in the Existing Less than One Year
      status at time of appraisal, the Mortgagee must obtain one of the following
      prior to closing and provide the applicable documentation in the case binder:
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing
      Programs Reverse Mortgages 8. Programs and Products - HECM For Purchase (04/10/2025)
      Handbook 4000.1 729 Last Revised: 11/26/2025 • a copy of the CO (or equivalent);
      or • a final inspection issued by the local authority with jurisdiction over
      the Property or by an ICC certified RCI or CI; or • in the absence of such ICC
      certified RCI or CI, the Mortgagee may obtain a final inspection performed by
      a disinterested third-party, who is a registered architect, a structural engineer,
      or a qualified trades person or contractor, and has met the licensing and bonding
      requirements of the State in which the property is located. (2) Manufactured
      Housing (a) Proposed Construction For Properties in the Proposed Construction
      status at time of appraisal, the Mortgagee must obtain one of the following
      prior to closing and provide the applicable documentation in the case binder:
      • copies of the building permit (or equivalent) and CO (or equivalent); or •
      two inspections (initial and final) performed by the local authority with jurisdiction
      over the Property or an ICC certified RCI or CI; or • in the absence of a local
      authority with building code jurisdiction or ICC certified RCI or CI, the Mortgagee
      may obtain two inspections (initial and final) performed by a disinterested
      third party, who is a registered architect, a structural engineer, or a qualified
      trades person or contractor, and has met the licensing and bonding requirements
      of the state in which the Property is located. (b) Under Construction For Properties
      in the Under Construction status at time of appraisal, the Mortgagee must obtain
      one of the following prior to closing and provide the applicable documentation
      in the case binder: • copies of the building permit (or equivalent) and CO (or
      equivalent); or • a final inspection performed by the local authority with jurisdiction
      over the Property or an ICC certified RCI or CI; or • in the absence of a local
      authority with building code jurisdiction or ICC certified RCI or CI, the Mortgagee
      may obtain a final inspection performed by a disinterested third party, who
      is a registered architect, a structural engineer, or a qualified trades person
      or contractor, and has met the licensing and bonding requirements of the state
      in which the Property is located. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products
      - HECM For Purchase (04/10/2025) Handbook 4000.1 730 Last Revised: 11/26/2025
      (c) Existing Less than One Year For Properties in the Existing Less than One
      Year status at time of appraisal, the Mortgagee must obtain one of the following
      prior to closing and provide the applicable documentation in the case binder:
      • a copy of the CO (or equivalent); or • a final inspection performed by the
      local authority with jurisdiction over the Property or an ICC certified RCI
      or CI; or • in the absence of a local authority with building code jurisdiction
      or ICC certified RCI or CI, the Mortgagee may obtain a final inspection performed
      by a disinterested third-party, who is a registered architect, a structural
      engineer, or a qualified trades person or contractor, and has met the licensing
      and bonding requirements of the State in which the property is located. (3)
      Units in Condominium Project or Legal Phase (Existing Less Than One Year) The
      Mortgagee must obtain a CO or its equivalent. (4) Required Documentation for
      New Construction Properties The Mortgagee must obtain and include the following
      documents in the case binder: • form HUD-92541, Builder’s Certification of Plans,
      Specifications, and Site; • form HUD-92544, Warranty of Completion of Construction;
      • a copy of the CO (or equivalent), if applicable; • required inspections, as
      applicable: • inspections performed by an ICC certified RCI or CI or a third-party,
      who is a registered architect, a structural engineer, or a qualified trades
      person or contractor must be reported on form HUD-92051, Compliance Inspection
      Report, or on an appropriate state-sanctioned inspection form; and • when a
      third party, who is a registered architect, a structural engineer, or a qualified
      tradesperson or contractor, is relied upon for required inspections due to the
      absence of an ICC certified RCI or CI, a certification from such inspector that
      they are licensed and bonded under applicable state and local laws to perform
      the type of inspection completed must be included; • a Wood Infestation Report,
      unless the Property is located in a county listed as not required on HUD’s “Termite
      Treatment Exception Areas” list: • form HUD-NPMA-99-A, Subterranean Termite
      Protection Builder’s Guarantee, is required for all New Construction. If the
      building is constructed with steel, masonry, or concrete building components
      with only minor interior wood trim and roof sheathing, no treatment is II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 8. Programs and Products - HECM For Purchase (04/10/2025) Handbook
      4000.1 731 Last Revised: 11/26/2025 needed. The Mortgagee must ensure that the
      builder notes on the form that the construction is masonry, steel, or concrete.
      • form HUD-NPMA-99-B, New Construction Subterranean Termite Service Record,
      is required when the New Construction Property is treated with one of the following:
      Termite Bait System, Field Applied Wood Treatment, soil chemical termiticide,
      or Physical Barrier System is installed, as reflected on form HUD-NPMA-99-A.
      The Mortgagee must reject the use of post construction soil treatment when the
      termiticide is applied only around the perimeter of the foundation; and • local
      Health Authority well water analysis and/or septic report, where required by
      the local jurisdictional authority. (C) Documents to be Provided to Appraiser
      at Assignment The Mortgagee must provide the Appraiser with a fully executed
      form HUD-92541, signed and dated no more than 30 Days prior to the date the
      appraisal was ordered. For Properties 90 percent completed or less, the Mortgagee
      must provide a copy of the floor plan, plot plan, and any other exhibits necessary
      to allow the Appraiser to determine the size and level of finish of the house
      they are appraising. For Properties greater than 90 percent but less than 100
      percent completed, the Mortgagee must provide the Appraiser with a list of components
      to be installed or completed after the date of inspection. (D) Property Considerations
      New Construction must meet HUD’s Minimum Property Requirements (MPR) and Minimum
      Property Standards (MPS). (E) Mortgagee Review of Appraisal (1) Site Considerations
      (a) Environmental The Mortgagee must require corrective work to mitigate any
      condition that arises during construction that may affect the health and safety
      of the occupants, the Property’s ability to serve as collateral, or the structural
      soundness of the improvements. (b) Operating Oil or Gas Wells If a New Construction
      dwelling is located within 75 feet of an operating oil or gas well, the Mortgagee
      must reject the Property unless mitigation measures are completed. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 8. Programs and Products - HECM For Purchase (04/10/2025) Handbook
      4000.1 732 Last Revised: 11/26/2025 (c) Slush Pits If a Property is Proposed
      Construction near an active or abandoned Slush Pit, the Appraiser must require
      a survey to locate the pit. The Mortgagee is to assess any impact on the subject
      Property. (d) Special Airport Hazards If a New Construction Property is located
      within Runway Clear Zones (also known as Runway Protection Zones) at civil airports
      or within Clear Zones at military airfields, the Mortgagee must reject the Property
      for insurance. Properties located in Accident Potential Zone 1 (APZ 1) at military
      airfields may be eligible for FHA mortgage insurance provided that the Mortgagee
      determines that the Property complies with Department of Defense guidelines.
      (e) Flood Hazard Areas If any portion of the dwelling and related Structures
      or equipment essential to the Property Value is located in a Special Flood Hazard
      Area (SFHA), the Mortgagee must reject the Property, unless the Mortgagee: •
      obtains a Federal Emergency Management Agency (FEMA)-issued final Letter of
      Map Amendment (LOMA) or final Letter of Map Revision (LOMR) that removes the
      Property from the SFHA; or • obtains a FEMA National Flood Insurance Program
      (NFIP) Elevation Certificate (FEMA Form FF-206-FY-22-152) that documents that
      the lowest floor of the residential building, including the basement, and all
      related Structures or equipment essential to the Property Value are built at
      or above the 100-year flood elevation in compliance with the NFIP criteria;
      and • ensures that the Elevation Certificate is completed based on finished
      construction. The Mortgagee must include the LOMA, LOMR, or FEMA NFIP Elevation
      Certificate (FEMA Form FF-206-FY-22-152) with the case when it is submitted
      for endorsement. The Mortgagee must ensure that Flood Insurance is obtained
      when a FEMA NFIP Elevation Certificate (FEMA Form FF-206-FY-22-152) documents
      that the Property remains located within an SFHA. (f) Individual Water Supply
      Systems (Wells) The Mortgagee must ensure that new wells are drilled and are
      no less than 20 feet deep and cased. Casing should be steel or other casing
      material that is durable, leak-proof, and acceptable to either the local health
      authority or the trade or profession licensed to drill and repair wells in the
      local jurisdiction. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title
      II Insured Housing Programs Reverse Mortgages 8. Programs and Products - HECM
      For Purchase (04/10/2025) Handbook 4000.1 733 Last Revised: 11/26/2025 A well
      located within the foundation walls of New Construction is not acceptable except
      in arctic or subarctic regions. (i) Requirements for Well Water Testing A well
      water test is required for all newly constructed Properties. All testing must
      be performed by a disinterested third party. This includes the collection and
      transport of the water sample collected at the water supply source. The sample
      must be collected and tested by the local health authority, a commercial testing
      laboratory, a licensed sanitary engineer, or other party that is acceptable
      to the local health authority. At no time will the Borrower/owner or other Interested
      Party collect and/or transport the sample. The following tables provide the
      minimum distance required between wells and sources of pollution: Water Well
      Location Minimum Property Standards for New Construction 24 CFR § 200.926d(f)(3)(iv)*
      1 Property line/10 feet 2 Septic tank/50 feet 3 Absorption field/100 feet 4
      Seepage pit or cesspool/100 feet 5 Sewer lines with permanent water-tight joints/10
      feet 6 Other sewer lines/50 feet 7 Chemically poisoned soil/25 feet (reduced
      to 15 feet where ground surface is protected by impervious strata of clay, hardpan,
      or rock) 8 Dry well/50 feet 9 Other – refer to local health authority minimums
      * distance requirements of local authority prevail if greater than stated above
      The following provides the minimum standards for Individual Water Supply Systems
      (wells): Individual Water System Minimum Property Standards for New Construction
      24 CFR § 200.926d(f)(1) and (2) 1 Lead-free piping 2 If no local chemical and
      bacteriological water standards, state standards apply 3 Connection of public
      water whenever feasible 4 Wells must deliver water flow of five gallons per
      minute over at least a four-hour period II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products
      - HECM For Purchase (04/10/2025) Handbook 4000.1 734 Last Revised: 11/26/2025
      (ii) Required Documentation The Mortgagee must submit a valid water test from
      the local health authority or qualified lab. The report may not be more that
      180 Days old from the Disbursement Date. (g) Shared Well (i) Definition Shared
      Well refers to a well that services two to four homes where there is a binding
      Shared Well Agreement between the property owners that meets FHA requirements.
      (ii) Standard A Shared Well is permitted if the requirements in Shared Wells
      are met. (F) Sales Comparison Approach: Comparable Selection For Properties
      in new subdivisions, the selected comparable sales must include at least one
      sale outside the subdivision or project and at least one sale from within the
      subdivision or project. (G) Seller Must Be Owner of Record (1) Standard To be
      eligible for a HECM insured by FHA, a Property must be purchased from the owner
      of record. The transaction may not involve any sale or assignment of the sales
      contract. (2) Required Documentation The Mortgagee must obtain documentation
      verifying that the seller is the owner of record. Such documentation may include,
      but is not limited to: • a property sales history report; • a copy of the recorded
      deed from the seller; or • other documentation, such as a copy of a property
      tax bill, title commitment, or binder demonstrating the seller’s ownership of
      the Property and the date it was acquired. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products
      - HECM For Purchase (04/10/2025) Handbook 4000.1 735 Last Revised: 11/26/2025
      (H) Restrictions on Property Flipping Property Flipping is indicative of a practice
      whereby recently acquired Property is resold for a considerable profit with
      an artificially inflated value. (1) Definition Property Flipping refers to the
      purchase and subsequent resale of a Property in a short period of time. Seller’s
      Date of Acquisition refers to the date the seller acquired legal ownership of
      that Property. Resale Date refers to the date all parties have executed the
      sales contract that will result in the FHA-insured HECM for the resale of the
      Property. (2) Standard (a) Time Restriction on Transfers of Title The eligibility
      of a Property for a HECM insured by FHA is determined by the time that has elapsed
      between the date the seller has acquired title to the Property and the resale
      date. (b) Restriction on Resales Occurring 90 Days or Fewer after Acquisition
      A Property that is being resold 90 Days or fewer following the seller’s date
      of acquisition is not eligible for an FHA-insured HECM. (c) Exceptions to Time
      Restrictions on Resale Exceptions to the 90-Day resale restriction are: • Properties
      acquired by an employer or relocation agency in connection with the relocation
      of an employee; • resales by HUD under its REO program; • sales by other U.S.
      government agencies of Single Family Properties pursuant to programs operated
      by these agencies; • sales of Properties by nonprofits approved to purchase
      HUD-owned Single Family Properties at a discount with resale restrictions; •
      sales of Properties that are acquired by the seller by inheritance; • sales
      of Properties by state and federally chartered financial institutions and Government-Sponsored
      Enterprises (GSEs); • sales of Properties by local and state government agencies;
      and • sales of Properties within Presidentially-Declared Major Disaster Areas
      (PDMDA), only upon issuance of a notice of an exception from HUD. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 8. Programs and Products - HECM For Purchase (04/10/2025) Handbook
      4000.1 736 Last Revised: 11/26/2025 The restrictions listed above and those
      in 24 CFR § 206.52(b) do not apply to a builder selling a newly built house
      or building a house for a Borrower planning to use FHA-insured financing. (3)
      Required Documentation The Mortgagee must obtain a 12-month chain of title documenting
      compliance with time restrictions on resales. vii. Completion of Construction
      Regardless of the inspection process used, the Mortgagee must certify on form
      HUD- 92800.5B, Conditional Commitment Direct Endorsement Statement of Appraised
      Value, that the Property is 100 percent complete and meets HUD’s MPR and MPS.
      viii. Minimum Required Repairs For HECM for Purchase transactions, the seller
      must complete all repairs necessary to: • maintain the safety, security, and
      soundness of the Property; • preserve the continued marketability of the Property;
      and • protect the health and safety of the occupants. The Appraiser must complete
      the appraisal as “Subject To” the completion of all required repairs. ix. Sales
      Contract and Supporting Documentation (A) Standard The Mortgagee must not originate
      an insured HECM for the purchase of a Property if any provision of the sales
      contract violates FHA requirements. The Mortgagee must ensure that (1) all purchasers
      listed on the sales contract are Borrowers, and (2) only those Borrowers may
      sign the sales contract. The Mortgagee may also list a Non-Borrowing Spouse
      (NBS) on the sales contract, but the NBS is not required to sign the sales contract.
      An addendum or modification may be used to remove or correct any provisions
      of the sales contract that do not conform to these requirements. (1) Amendatory
      Clause If the Borrower does not receive form HUD-92800.5B before signing the
      sales contract, the sales contract must include or be amended before closing
      to include an amendatory clause that contains the following language: II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 8. Programs and Products - HECM For Purchase (04/10/2025) Handbook
      4000.1 737 Last Revised: 11/26/2025 “It is expressly agreed that notwithstanding
      any other provisions of this contract, the purchaser shall not be obligated
      to complete the purchase of the property described herein or to incur any penalty
      by forfeiture of earnest money deposits or otherwise, unless the purchaser has
      been given, in accordance with HUD/FHA or VA requirements, a written statement
      by the Federal Housing Commissioner, Department of Veterans Affairs, or a Direct
      Endorsement lender setting forth the appraised value of the property of not
      less than $___________*. The purchaser shall have the privilege and option of
      proceeding with consummation of the contract without regard to the amount of
      the appraised valuation. The appraised valuation is arrived at to determine
      the maximum mortgage the Department of Housing and Urban Development will insure.
      HUD does not warrant the value or condition of the property. The purchaser should
      satisfy himself/herself that the price and condition of the property are acceptable.”
      Mortgagees must ensure the actual dollar amount of the sales price stated in
      the contract has been inserted in the amendatory clause. Increases to the sales
      price require a revised amendatory clause. An amendatory clause is not required
      in connection with: • HUD Real Estate Owned (REO) sales; or • sales in which
      the seller is: • Fannie Mae; • Freddie Mac; • U.S. Department of Veterans Affairs
      (VA); • United States Department of Agriculture (USDA) Rural Housing Services;
      • other federal, state, and local government agencies; • a Mortgagee disposing
      of REO assets; or • a seller at a foreclosure sale. (2) Real Estate Certification
      The Borrower, seller, and real estate agent or broker involved in the sales
      transaction must certify, to the best of their knowledge and belief, that (1)
      the terms and conditions of the sales contract are true and (2) any other agreement
      entered into by any parties in connection with the real estate transaction is
      part of, or attached to, the sales agreement. A separate certification is not
      needed if the sales contract contains a statement that (1) there are no other
      agreements between parties and the terms constitute the entire agreement between
      the parties, and (2) all parties are signatories to the sales contract submitted
      at the time the financial assessment is performed. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products
      - HECM For Purchase (04/10/2025) Handbook 4000.1 738 Last Revised: 11/26/2025
      (3) Property Assessed Clean Energy Where the subject Property is encumbered
      with a Property Assessed Clean Energy (PACE) obligation, the sales contract
      must include a clause specifying that the PACE obligation will be satisfied
      by the seller at, or prior to, closing. (B) Required Documentation The Mortgagee
      must obtain all signed copies of sales contract(s), including a complete copy
      of the final sales contract with any modifications or revisions agreed upon
      by the Borrower and seller. The documentation must also include the amendatory
      clause executed by all parties, Real Estate Certification executed by all parties,
      and all other contract addenda. (C) Ordering a Second Appraisal The Mortgagee
      is prohibited from ordering an additional appraisal to achieve an increase in
      value for the Property and/or the elimination or reduction of deficiencies and/or
      repairs required. The Mortgagee may order a second appraisal for transactions
      that are in accordance with requirements on Property Flipping. x. HUD Required
      Disclosures (A) Lead-Based Paint If the Property was built before 1978, the
      seller must disclose any information known about lead-based paint and lead-based
      paint hazards before selling the house, in accordance with the HUD-EPA Lead
      Disclosure Rule (24 CFR 35, subpart A, and the identical 40 CFR 745, subpart
      F). For such Properties, the Mortgagee must ensure that: • the Borrower has
      been provided the EPA-approved information pamphlet on identifying and controlling
      lead-based paint hazards (“Protect Your Family from Lead in Your Home”); • the
      Borrower was given a 10-Day period before becoming obligated to purchase the
      home to conduct a lead-based paint inspection or risk assessment to determine
      the presence of lead-based paint or lead-based paint hazards, or the Borrower
      waived the opportunity; • the sales contract contains an attachment in the language
      of the contract (e.g., English, Spanish) signed and dated by both the seller
      and purchaser: • containing a lead warning statement as set forth in 24 CFR
      § 35.92(a)(1); • providing the seller’s disclosure of the presence of any known
      lead-based paint and/or lead-based paint hazards in the target housing being
      sold, or indication of no knowledge of such presence; II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages
      8. Programs and Products - HECM For Purchase (04/10/2025) Handbook 4000.1 739
      Last Revised: 11/26/2025 • listing any records or reports available to the seller
      pertaining to lead- based paint and/or lead-based paint hazards in property
      housing being sold, or indication by the seller that no such records or reports
      exist; and • affirming that the Borrower received the pamphlet, disclosure,
      and records or reports above; and • when any agent is involved in the transaction
      on behalf of the seller, the sales contract includes a statement that the agent
      has informed the seller of the seller’s Lead Disclosure Rule obligations, and
      the agent is aware of their duty to ensure compliance with the requirements
      of the Rule, and the agent has signed and dated the contract. (B) Form HUD-92564-CN,
      For Your Protection: Get A Home Inspection Mortgagees are required to provide
      form HUD-92564-CN, For Your Protection: Get a Home Inspection, to prospective
      homebuyers at initial application. xi. Underwriting the Property (A) Required
      Repairs Where major property deficiencies threaten the health and safety of
      the homeowner and/or jeopardize the soundness and security of the Property,
      all repairs must be completed by the seller prior to closing. A Repair Set-Aside
      is not permitted. (B) Chain of Title The Mortgagee must review the appraisal
      to determine if the subject Property was sold within 12 months prior to the
      case number assignment date. If the subject Property was sold within the previous
      12 months, the Mortgagee must review evidence of prior ownership and for compliance
      with Restrictions on Property Flipping. xii. Performing the Financial Assessment
      (A) Credit History Requirements (1) Types of Credit History If a traditional
      credit report is available, the Mortgagee must use a traditional credit report.
      If a traditional credit report is not available, the Mortgagee must develop
      the Borrower’s credit history using the requirements for non-traditional and
      insufficient credit. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title
      II Insured Housing Programs Reverse Mortgages 8. Programs and Products - HECM
      For Purchase (04/10/2025) Handbook 4000.1 740 Last Revised: 11/26/2025 (a) Non-Traditional
      Credit Requirements For Borrowers without a credit score, the Mortgagee must
      either obtain a Non-Traditional Mortgage Credit Report (NTMCR) from a credit
      reporting company or independently develop the Borrower’s credit history using
      the requirements outlined below. (b) Non-Traditional Mortgage Credit Report
      (i) Definition A Non-Traditional Mortgage Credit Report (NTMCR) is designed
      to access the credit history of a Borrower who does not have the types of trade
      references that appear on a traditional credit report and is used either as:
      • a substitute for a Tri-Merged Credit Report (TRMCR) or a Residential Mortgage
      Credit Report (RMCR); or • a supplement to a traditional credit report that
      has an insufficient number of trade items reported to generate a credit score.
      (ii) Standard Mortgagees may use an NTMCR developed by a credit reporting agency
      that verifies the following information for all non-traditional credit references:
      • the existence of the credit providers; • that the credit was actually extended
      to the Borrower; and • the creditor has a published address or telephone number.
      The NTMCR must not include subjective statements such as “satisfactory” or “acceptable,”
      must be formatted in a similar fashion to traditional references, and provide:
      • creditor’s name; • date of opening; • high credit; • current status of the
      account; • 12-month history of the account; • required monthly payment; • unpaid
      balance; and • payment history in the delinquency categories (for example, 0x30
      and 0x60). II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured
      Housing Programs Reverse Mortgages 8. Programs and Products - HECM For Purchase
      (04/10/2025) Handbook 4000.1 741 Last Revised: 11/26/2025 (iii)Independent Verification
      of Non-Traditional Credit The Mortgagee may independently verify the Borrower’s
      credit references by documenting the existence of the credit provider and that
      the provider extended credit to the Borrower. • To verify the existence of each
      credit provider, the Mortgagee must review public records from the state, county,
      or city or other documents providing a similar level of objective information.
      • To verify credit information, the Mortgagee must: • use a published address
      or telephone number for the credit provider and not rely solely on information
      provided by the Borrower; and • obtain the most recent 12 months of canceled
      checks, or equivalent proof of payment, demonstrating the timing of payment
      to the credit provider. • To verify the Borrower’s rental payment history, the
      Mortgagee must obtain a rental reference from the appropriate rental management
      company, provided the Borrower is not renting from a Family Member, demonstrating
      the timing of payment of the most recent 12 months in lieu of 12 months of canceled
      checks or equivalent proof of payment. (iv) Sufficiency of Credit References
      To be sufficient to establish the Borrower’s credit, the credit history must
      include three credit references. The Borrower’s credit history must include
      at least one of the following: • rental housing payments (subject to independent
      verification if the Borrower is a renter); • telephone service; or • utility
      company reference (if not included in the rental housing payment), including:
      • gas; • electricity; • water; • television service; or • internet service.
      If the Mortgagee cannot obtain all three credit references from the list above,
      the Mortgagee may use the following sources of unreported recurring debt to
      obtain the remaining one or two credit references needed: • insurance premiums
      not payroll deducted (for example, medical, auto, life, or renter’s insurance);
      • payment to child care providers made to businesses that provide such services;
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing
      Programs Reverse Mortgages 8. Programs and Products - HECM For Purchase (04/10/2025)
      Handbook 4000.1 742 Last Revised: 11/26/2025 • school tuition; • retail store
      credit cards (for example, from department, furniture, appliance stores, or
      specialty stores); • rent-to-own (for example, furniture, appliances); • payment
      of that part of medical bills not covered by insurance; • a documented 12-month
      history of savings evidenced by regular deposits resulting in an increased balance
      to the account that: • were made at least quarterly; • were not payroll deducted;
      and • caused no Insufficient Funds (NSF) checks; • an automobile lease; • a
      personal loan from an individual with repayment terms in writing and supported
      by canceled checks to document the payments; or • a documented 12-month history
      of payment by the Borrower on an account for which the Borrower is an authorized
      user. (2) Bankruptcy (a) Chapter 7 A Chapter 7 bankruptcy (liquidation) does
      not disqualify a Borrower from consideration for a HECM for Purchase if, at
      the time of case number assignment, at least two years have elapsed since the
      date of the bankruptcy discharge. During the most recent two years, the Borrower
      must have: • reestablished good credit; or • chosen not to incur new credit
      obligations. An elapsed period of less than two years, but not less than 12
      months, may be acceptable, if the Borrower: • can show that the bankruptcy was
      caused by Extenuating Circumstances beyond the Borrower’s control; and • has
      since exhibited a documented ability to manage their financial affairs in a
      responsible manner. (b) Chapter 13 A Chapter 13 bankruptcy does not disqualify
      a Borrower from consideration for a HECM for Purchase, if at the time of case
      number assignment, the bankruptcy has been discharged or at least 12 months
      of the payout period under the bankruptcy has elapsed. If the bankruptcy has
      not been discharged, the Mortgagee must determine that, during the most recent
      12 months, the Borrower’s payment performance has been satisfactory, all required
      payments have been made on time, and the Borrower has received written permission
      from the bankruptcy court to enter into the mortgage transaction. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 8. Programs and Products - HECM For Purchase (04/10/2025) Handbook
      4000.1 743 Last Revised: 11/26/2025 The Mortgagee must include the payment amount
      in the court-approved payment plan in the Borrower’s expenses when calculating
      Residual Income. (c) Required Documentation If the credit report does not verify
      the discharge date or additional documentation is necessary to determine if
      any liabilities were discharged in the bankruptcy, the Mortgagee must obtain
      the bankruptcy and discharge documents. The Mortgagee must also document that
      the Borrower’s current situation indicates that the events that led to the bankruptcy
      are not likely to recur. (B) Other Sources of Effective Income Boarders of the
      Subject Property The Mortgagee must obtain a copy of the executed written agreement
      documenting the intent of the Boarders to continue boarding with the Borrower.
      (C) Asset Requirements – Acceptable Sources of Funds (1) Earnest Money Deposit
      The Mortgagee must verify and document the deposit amount and source of funds
      if the amount of the earnest money deposit exceeds 1 percent of the sales price
      or is excessive based on the Borrower’s history of accumulating savings, by
      obtaining: • a copy of the Borrower’s canceled check; • certification from the
      deposit-holder acknowledging receipt of funds; • a Verification of Deposit (VOD)
      or bank statement showing that the average balance was sufficient to cover the
      amount of the earnest money deposit at the time of the deposit; or • direct
      verification by a Third Party Verification (TPV) vendor, subject to the following
      requirements: • the Borrower has authorized the Mortgagee to verify assets;
      • the date of the completed verification conforms with FHA requirements in Maximum
      Age of HECM Documents; and • the information shows that the average balance
      was sufficient to cover the amount of the earnest money deposit at the time
      of the deposit. If the source of the earnest money deposit was a Gift, the Mortgagee
      must verify that the Gift is in compliance with Standards for Gifts. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 8. Programs and Products - HECM For Purchase (04/10/2025) Handbook
      4000.1 744 Last Revised: 11/26/2025 (2) Monetary Investment (a) Definition Monetary
      Investment refers to the amount Borrowers must provide to satisfy the difference
      between the Principal Limit and the sale price for the Property, plus any HECM-related
      fees that are not financed into the HECM, minus the amount of the earnest deposit.
      (b) Source Requirements for the Borrower’s Monetary Investment (i) Acceptable
      Monetary Investment Funding Sources To satisfy the required monetary investment,
      Borrowers may use: • Cash on Hand; • cash from the sale or liquidation of the
      Borrower’s assets; • HECM proceeds; • Interested Party Contributions; and •
      other Acceptable Sources of Funds. A Family Member entitled to the commission
      may also provide it as a Gift, in compliance with standard gift requirements.
      A Borrower who also serves as the licensed real estate agent on a HECM for Purchase
      transaction may use the real estate commission to satisfy the required monetary
      investment. The Borrower may choose to provide a larger investment amount in
      order to retain a portion of the available HECM proceeds for future draws. (ii)
      Unacceptable Monetary Investment Funding Sources The Borrower may not use the
      following funding sources to satisfy the required monetary investment: • Sweat
      Equity; • Trade Equity; • rent credit; or • Premium Pricing. (iii)Required Documentation
      The Mortgagee must document that the Borrower’s monetary investment is from
      an acceptable monetary investment funding source and there will be no outstanding
      or unpaid obligations incurred by the Borrower in connection with the HECM for
      Purchase transaction. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title
      II Insured Housing Programs Reverse Mortgages 8. Programs and Products - HECM
      For Purchase (04/10/2025) Handbook 4000.1 745 Last Revised: 11/26/2025 The Mortgagee
      must verify and document that the Borrower, or Family Member giving the commission
      as a Gift, is a licensed real estate agent, and is entitled to a Real Estate
      Commission from the Sale of the Subject Property being purchased. (3) Interested
      Party Contributions (a) Definitions Interested Parties refer to sellers, real
      estate agents, builders, developers, Mortgagees, Third-Party Originators (TPO),
      or other parties with an interest in the transaction. Interested Party Contribution
      refers to a payment by an Interested Party or combination of parties, toward
      the Borrower’s loan origination fees, other closing costs including any items
      Paid Outside Closing (POC), and prepaid items. (b) Standard Interested Parties,
      excluding Mortgagees and TPOs, may contribute up to 6 percent of the sales price
      toward the following items: • loan origination fees; • other closing costs;
      • prepaid items; and • payment of the IMIP. No other items may be paid for by
      an Interested Party. Mortgagees and TPOs are prohibited from making any Interested
      Party Contributions. Exceptions Fees required to be paid by a seller under state
      or local law or customarily paid by a seller in the subject property locality,
      including real estate agent commissions or fees, and the purchase of the Home
      Warranty policy by the seller are already permitted under 24 CFR § 206.44(c)(1)
      and will be excluded from the six percent interested party contribution limit.
      Mortgagees may pay for services performed by a sponsored TPO if allowed under
      the Loan Origination Fee Calculation requirements. The satisfaction of a PACE
      lien or obligation against the Property by the property owner is not considered
      an Interested Party Contribution. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 8. Programs and Products
      - HECM For Purchase (04/10/2025) Handbook 4000.1 746 Last Revised: 11/26/2025
      (c) Required Documentation The Mortgagee must accurately document the total
      amount of Interested Party Contributions on the HUD-1 Settlement Statement,
      and reflected on the sales contract or applicable legally binding document.
      When a legally binding document other than the sales contract is used to document
      the Interested Party Contributions, the Mortgagee must provide a copy of this
      document to the assigned Appraiser. xiii. Closing (A) HUD-1 Addendum Closing
      Certifications The Mortgagee must obtain the final HUD-1 Settlement Statement
      or similar legal document from the settlement agent. If the seller’s HUD-1 Settlement
      Statement or similar legal document is provided separately, the Mortgagee must
      obtain from the Closing Agent a copy of the final disclosure provided to the
      seller to keep in the case binder. (B) Seller Certification The seller must
      sign the certification to the Addendum to HUD-1 Settlement Statement. (C) Inspection
      and Repair Requirements for HECMs Pending Closing in Presidentially-Declared
      Major Disaster Areas For HECM for Purchase transactions that have not closed,
      repairs must be completed prior to closing and the cost of repairs is the responsibility
      of the seller. (D) Closing Costs and Fees (1) Mandatory Obligations The Mortgagee
      may use HECM proceeds to satisfy the Borrower’s Mandatory Obligations. Mandatory
      Obligations include: • IMIP; • loan origination fee; • HECM counseling fee;
      • reasonable and customary amounts, but not more than the amount actually paid
      by the Mortgagee for any of the following items: • recording fees and recording
      taxes or other charges incident to the recordation of the insured HECM; • credit
      report; • survey, if required by the Mortgagee or the Borrower; II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 8. Programs and Products - HECM For Purchase (04/10/2025) Handbook
      4000.1 747 Last Revised: 11/26/2025 • title examination; • Mortgagee’s title
      insurance; and • fees paid to an Appraiser for the initial appraisal of the
      Property; • delinquent Federal Debt; • fees and charges for real estate sales
      contracts, warranties, inspections, surveys, and engineer certifications; •
      the total amount of property tax and Flood and Hazard Insurance charges scheduled
      for payment during the First 12-Month Disbursement Period from a Fully Funded
      LESA. Mortgagees must use the actual insurance premium and actual tax amount;
      • property tax and Flood and Hazard Insurance payments required by the Mortgagee
      to be paid at closing; • the amount of the principal that is advanced toward
      the purchase price of the subject Property; • other charges as authorized by
      the Secretary; and • for adjustable rate HECMs: • the total amount of property
      charge payments scheduled for payment through the optional Borrower authorized
      option during the First 12- Month Disbursement Period; and • the total amount
      of semiannual Disbursements scheduled to be made during the First 12-Month Disbursement
      Period to the Borrower from a Partially Funded LESA. (2) Property Assessed Clean
      Energy The PACE obligation must be paid off in full by the seller prior to or
      at closing. (3) Discount Points and Interest Rate Buydowns The Mortgagee may
      not charge Discount Points. Temporary and permanent interest rate buydowns are
      not permitted. (4) Interested Party Contributions on the HUD-1 Settlement Statement
      The Mortgagee may apply permissible Interested Party Contributions toward the
      Borrower’s closing costs and other fees required to obtain a HECM. The Mortgagee
      must identify the total Interested Party Contributions on the front page of
      the HUD-1 Settlement Statement or similar legal document or in an addendum,
      and on Exhibit 2 – Schedule of Closing Costs. The Mortgagee must identify each
      item and fee paid by an Interested Party Contribution. II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages
      8. Programs and Products - HECM For Purchase (04/10/2025) Handbook 4000.1 748
      Last Revised: 11/26/2025 (E) Mortgage and Note All Borrowers and co-Borrowers
      must take title to the Property in their own name or a living trust at settlement,
      be obligated on the Note or credit instrument, and sign all security instruments.
      In community property states, the Borrower’s spouse is not required to be a
      Borrower or a Co-signer. However, the Mortgage must be executed by all parties
      necessary to make the lien valid and enforceable under state law. (F) Certificate
      of Occupancy (1) Standard The Mortgagee must obtain a copy of the CO, or its
      equivalent, if the date of the issuance of the CO or equivalent is less than
      one year before closing and the Property has never been occupied. (2) Required
      Documentation The Mortgagee must obtain a copy of the CO or its equivalent issued
      by the local jurisdiction, ICC RCI, or CI. xiv. Post-closing and Endorsement
      (A) Settlement Statement and Settlement Certification If the HUD-1 Settlement
      Statement or similar legal document is provided separately, the Mortgagee must
      obtain from the Closing Agent a copy of the final statement provided to the
      seller to keep in the case binder. (B) Form NPMA-33, Wood Destroying Insect
      Inspection Report The Mortgagee must confirm that the HECM file contains the
      National Pest Management Association (NPMA) form NPMA-33, Wood Destroying Insect
      Inspection Report, or the state mandated infestation report, as applicable.
      (C) Local Health Authority’s Approval for Individual Water and Sewer Systems
      The Mortgagee must confirm that the HECM file contains the Local Health Authority’s
      approval for Individual Water Supply Systems and sewer systems, if applicable.
      (D) HECM for Purchase New Construction Exhibits The Mortgagee must confirm that
      the documentation requirements found in the HECM for Purchase product sheet
      are in the HECM file. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title
      II Insured Housing Programs Reverse Mortgages'
  judgment: false
