HECM For A Newly Built Home
A HECM for Purchase can be used on new construction as well as existing homes. The house must be finished, inspected, and documented before closing.
What counts as new construction
FHA sorts a newly built home into one of three stages, and the stage at appraisal decides which inspections are needed.
- Proposed Construction means no concrete or permanent material has been placed yet, and digging footings does not count as permanent.
- Under Construction runs from the first placement of permanent material to 100 percent completion with no certificate of occupancy.
- Existing Less Than One Year means the home is 100 percent complete, was finished less than one year from the certificate of occupancy, and has never been occupied.
- A home finished less than one year ago that has already been occupied is treated as Existing Construction.
- New construction must meet HUD’s Minimum Property Requirements and Minimum Property Standards.
- Eligible new homes include site built housing, condominium units in approved projects, and one-unit manufactured housing.
One closing for home and loan
Finished homes only at closing
Inspections by qualified parties
Builder warranty in the file
Your own funds at closing
Site hazards checked up front
How Does New Construction Work?
The lender has to show the home was built to FHA standards and is fully complete before the HECM closes.
Our reverse mortgage program accepts a newly built home only after the local authority has issued a certificate of occupancy or its equivalent, and construction must be complete. HUD also requires the lender to document how the home was built, through the building permit and certificate of occupancy or through footing, framing, and final inspections by the local authority or an ICC certified inspector.
Where no ICC certified inspector is available, those inspections can come from a disinterested registered architect, structural engineer, or qualified contractor who meets the state’s licensing and bonding requirements. For a home finished less than one year ago that has never been occupied, the lender must obtain a copy of the certificate of occupancy.
Whichever inspection path is used, the lender must certify that the home is 100 percent complete and meets HUD’s minimum standards. The file must also hold the builder’s certification of plans, specifications, and site, the builder’s warranty of completion, and the certificate of occupancy when applicable. A local well water analysis or septic report is added where the local authority requires it.
Why choose Saxton for a new construction HECM
This page is for homebuyers who want to use a HECM for Purchase on a newly built home, and for adult children helping a parent with that move.
Builder Forms In Order
The appraiser must receive a fully executed builder certification signed and dated no more than 30 days before the appraisal was ordered. For homes 90 percent complete or less, the floor plan and plot plan go to the appraiser too.
Your Funds Stay Your Own
Under our reverse mortgage program, builder incentives and seller concessions cannot be used as a source of the money you bring to closing. Allowed sources include cash on hand, cash from a bank account, and cash from the sale of assets.
Site Hazards Get Checked
A new home within 75 feet of an operating oil or gas well is rejected unless mitigation is completed. A new home inside a runway clear zone at a civil airport or a clear zone at a military airfield is rejected for insurance.
Well Water Gets Tested
If a newly built home uses a private well, a well water test is required, and the sample must be collected and tested by a disinterested third party. The report may not be more than 180 days old at disbursement.
Comparables From Both Sides
In a new subdivision, the appraisal must include at least one comparable sale from inside the subdivision and at least one from outside it.
Seller Must Own It
The home must be bought from the owner of record, and the deal may not involve any sale or assignment of the sales contract.
Hear From Homeowners Like You
Frequently Asked Questions
Common questions about using a HECM for Purchase on a newly built home.
No. The lender must certify that the home is 100 percent complete and meets HUD’s minimum standards, and the required inspections or certificate of occupancy must be obtained before closing.
Yes. Our reverse mortgage program does not accept a newly built home until the local authority has issued a certificate of occupancy or its equivalent, and construction must be complete. For a home finished less than one year ago that has never been occupied, the lender keeps a copy in the file.
Ask us before you sign. Our reverse mortgage program lists builder incentives and seller concessions as sources that cannot be used for the money you bring to closing, so we check how a specific builder offer would be treated.
Form HUD-92541, the Builder’s Certification of Plans, Specifications, and Site, and form HUD-92544, the Warranty of Completion of Construction. The builder also provides the termite protection guarantee on form HUD-NPMA-99-A.
A wood infestation report is required unless the home is in a county HUD lists as not required. If the home is built with steel, masonry, or concrete with only minor interior wood trim and roof sheathing, no treatment is needed, and the builder notes that on the form.
One-unit manufactured housing, or one unit with an ADU, is an eligible property type. If it was proposed at appraisal, the lender needs the permit and certificate of occupancy, or initial and final inspections.
A home in a Special Flood Hazard Area is rejected unless FEMA issues a final letter removing it, or an elevation certificate based on finished construction shows it is built at or above the 100-year flood elevation. Flood insurance is required if the home remains in the zone.
Saxton Mortgage does. Our reverse mortgage program accepts a newly built home once the local authority has issued a certificate of occupancy or its equivalent and construction is complete.
Find out what you qualify for
Tell us about the new home and where the builder is in the process, and we will check how it fits our program.
Get Pre-Qualified- U.S. Department of Housing and Urban Development, FHA and housing resources
- U.S. Department of Housing and Urban Development, FHA mortgage insurance premiums
Loan amounts, rates, terms, and eligibility are subject to credit approval, asset and income verification, appraisal, and program guidelines. Program availability varies by state. Not all applicants will qualify. Saxton Mortgage, LLC is an Equal Housing Lender.