Frequently Asked Questions

Do I own my home with an H4P loan?

Many seniors believe the bank gets the home in the transaction. The borrower still retains ownership of the home over the life of the loan. The H4P loan is simply secured with a lien, just like a traditional mortgage or a home equity line of credit.

Can I make voluntary prepayments toward the H4P loan balance?

Yes, prepayments can be made to the loan balance at any time. There may be certain tax advantages for making prepayments. That said, we are not tax advisors nor financial planners, and you should consult one for guidance on tax matters.

What source of funds (money) are allowed when you purchase a home with an H4P loan?

The money must come for your liquid assets (e.g., bank accounts, CDs, retirement accounts) or from the documented sale of other assets you may have (your present home for example). The sales contract must be signed more than 90 days from the seller’s purchase of the property.

What are my responsibilities as the borrower?

• Occupy the home as your primary residence • Maintain the home to FHA standards, • Pay your property taxes, and • Pay your property insurance (and any other applicable property-related charges, like homeowner association dues or condo dues)

Is there a Mortgage Insurance Premium (MIP)?

Similar to a traditional FHA mortgage, you will be required to pay upfront and ongoing mortgage insurance premiums. This premium is usually financed into the loan and not paid out of pocket – its purpose is to fund the non-recourse feature, which protects you or your heirs from being stuck with a bill if your loan balance is higher than what your home sells for when the loan matures and is due and payable.

I want to buy a new construction home — can I start the application before the home is completed?

Yes, you can complete the H4P application and begin the process of securing the loan, but the appraisal, and consequently the loan closing, cannot happen until the Certificate of Occupancy has been issued.

Why is my down payment higher with an H4P loan compared to a conventional mortgage?

Your down payment is higher initially because you will not be required to make monthly mortgage payments (except for taxes and insurance). With a traditional mortgage, you could potentially lose more in cash flow over the years because of the consistently required payments.