Welcome to our guide on Purchase Reverse Mortgages! In this article, we will explain how you can buy a new home with a special kind of reverse mortgage, making it easier for you to transition to a new living situation as you age. Whether you are considering downsizing, moving to a more accessible home, or relocating closer to family, this guide is for you.
We will cover the essentials – from the benefits of a Reverse Mortgage Purchase to how the Home Equity Conversion Mortgage (HECM) for Purchase program works – to help you understand if this option is right for you.
The HECM for Purchase is the most common reverse mortgage used to buy new homes. Applying for and qualifying for a HECM for Purchase follows the same steps as applying for any HECM loan.
Here are the main requirements:
After getting a HECM for Purchase, borrowers must:
The main difference between using a reverse mortgage to purchase a home and getting a reverse mortgage later is that the purchase is all done in one transaction, which means there are no duplicate fees.
For a Reverse Mortgage Purchase, the borrower needs to cover the down payment for the new home, which includes the required mortgage insurance. This may cost more than a typical conventional home mortgage, but it is still less expensive than buying a home and then getting a reverse mortgage later.
If you’re considering a reverse mortgage, a single Reverse Mortgage Purchase is often a better option than buying a home and refinancing with a reverse mortgage later.
A certificate of occupancy must be in place for new construction before completing a HECM for purchase transaction. Most property types can be purchased with a reverse mortgage, with a few exceptions.
Certain types of manufactured homes may also be ineligible for reverse mortgage financing, especially those built before 1976. HUD sets minimum standards for manufactured homes, and any properties that do not meet these standards are not eligible for a reverse purchase mortgage.
With a reverse mortgage for purchase, the borrower must cover the down payment for the new home. While this down payment is higher than for most other types of financing, there are no required monthly payments afterward.
Many borrowers use the equity from selling their current home to make the down payment on the new home. If this isn’t enough, the borrower may need to use savings or other sources. If the sale of the old home doesn’t cover the down payment for the new home, the borrower will need to provide the difference in cash.
FHA allows some sources, such as family gifts from those who do not have a stake in the transaction, to help with the down payment. If you plan to use gift funds, discuss this with your lender to ensure you meet the requirements for gift fund verification and eligibility.
The down payment requirement depends on:
Typically, the down payment for a HECM for Purchase is between 45-70% of the purchase price. The table below provides examples of down payment requirements for various home prices and borrower ages.
2025 HECM Purchase: Down Payment Estimates by Age
Your Age % Down $200,000 Home $400,000 Home $600,000 Home $800,000 Home $1,000,000 Home
62 67.2% $134,400 $268,800 $403,200 $537,600 $672,000
65 65.1% $130,200 $260,400 $390,600 $520,800 $651,000
70 61.4% $122,800 $245,600 $368,400 $491,200 $614,000
75 58.5% $117,000 $234,000 $351,000 $468,000 $585,000
80 54.1% $108,200 $216,400 $324,600 $432,800 $541,000
85 47.9% $95,800 $191,600 $287,400 $383,200 $479,000
90 40.9% $81,800 $163,600 $245,400 $327,200 $409,000
Note: Estimates include closing costs (e.g., 2% insurance fee) at 5.75% rate (5.69% expected + 1.50% CMT margin) as of 05/24/2025. Not a loan offer.
Here are common sources for your down payment:
The most common ways to meet the down payment requirement are proceeds from the sale of your previous home and savings. The Federal Housing Administration (FHA), which insures the loan, accepts various funding sources.
Acceptable sources for financing the down payment include:
All funds must be verified. Gifts from anyone involved in the transaction are not acceptable. Other less common funding sources, such as collateralized loans, savings bonds, and employer assistance programs, can also be used.
The following sources are not acceptable for your down payment:
Let’s look at an example using a 70-year-old borrower who uses a reverse mortgage to buy a $400,000 home. The required down payment is $182,000, which is approximately 45% of the purchase price.
Predicting future interest rates or how much your home will appreciate over time is difficult. For this example, we’ll use a 4% annual appreciation rate for the home. The interest is calculated using an “expected rate” based on a 10-year index rather than the lower initial index rate.
While many properties appreciate more than 4% annually, 4% is a conservative estimate. You can adjust this based on your own expectations for your home’s appreciation.
The down payment covers all upfront mortgage insurance premiums and third-party closing costs. Based on the assumptions mentioned, the borrower would have $210,000 in home equity after five years of making no mortgage payments. After ten years, this amount would increase to $257,000.
If the borrower later decides to move into an assisted care facility, the loan becomes due. The borrower or their family can sell the home. Any equity above the outstanding loan balance belongs to the borrower and their heirs.
They can:
The remaining equity depends on the home’s future appreciation, interest rates, the amount and timeliness of reverse mortgage funds drawn (which are 100% at inception for a purchase), and whether the borrower makes any early voluntary repayments.
Also See: Here’s an Ideal Reverse Mortgage Purchase Example
2025 Reverse Mortgage Purchase Rates: Fixed vs. Adjustable
Lending Limit Fixed Rate (APR) Adjustable Rate (Margin)
$1,209,750 (HECM) 7.180% (8.700% APR) 6.885% (2.125% Margin)
$4,000,000 (Jumbo) 10.125% (10.612% APR) 11.385% (6.625% Margin)
Note: Fixed APR example: 7.18% + 0.50% MIP = 7.68% total interest for a $250,000 loan, including standard closing costs.
The HECM purchase program can be an excellent option for those who want to move during retirement, as it allows them to do so without making monthly mortgage payments. However, like all loans, there are some pros and cons.
When purchasing a home with a reverse mortgage, it’s important to consider the real estate agent’s experience with reverse mortgages. While your mortgage originator can assist with questions, working with a real estate agent familiar with reverse mortgage transactions can be beneficial.
| Key Topic | How It Works |
|---|---|
| Who Qualifies? | Homebuyers age 62+ who meet HUD’s financial guidelines |
| Down Payment Needed? | Yes – Typically 45–70% of the purchase price depending on age and rates |
| Monthly Mortgage Payments? | No – Just maintain property taxes, insurance, and upkeep |
| Eligible Property Types | Single-family homes, HUD-approved condos, 2–4 unit homes (owner-occupied) |
| Ineligible Properties | Co-ops, homes under construction, some manufactured homes |
| Best Funding Sources | Proceeds from selling your current home, savings, or eligible family gifts |
| Benefits of the Program | One transaction, no monthly payments, FHA-insured with non-recourse protection |
| Limitations to Consider | Higher down payment than traditional loans, upfront/ongoing MIP applies |
All Reverse Mortgage flawlessly handled my reverse mortgage purchase, providing clear explanations and great professionalism. They promptly answered my questions and quickly returned calls. I highly recommend them to friends and family. -John P.(BBB)
Thinking About Buying a Home with a Reverse Mortgage? We Make It Simple. With the HECM for Purchase program, you can buy your next home without monthly mortgage payments. Whether you’re downsizing, relocating, or just want a more comfortable living space, All Reverse Mortgage, Inc. (ARLO™) helps you do it in one seamless transaction—with expert guidance and transparent costs. Call us Toll-Free at (800) 565-1722 or use our reverse mortgage purchase calculator to see how much home you can afford. No pressure—just personalized answers to help you make the right move.
Yes. Reverse mortgages have been available for purchase transactions since 2008. The FHA implemented this to eliminate the need for borrowers to do two separate transactions when buying a new home.
A reverse mortgage for purchase works similarly to a standard reverse mortgage. The loan amount is calculated using the age of the youngest borrower/spouse and the interest rate. The borrower then brings in funds at closing to cover the difference.
The down payment required depends on the borrower’s eligibility as determined by the HECM purchase calculator. Factors include the age of the youngest borrower/spouse, the interest rate, and the HUD lending limit. Typically, a 62-year-old borrower may need a down payment of about 36% of the purchase price, while a 92-year-old may need about 65%.
Yes, the source of your down payment is important when it comes to a reverse mortgage for a home purchase. The down payment cannot be made with borrowed funds. You must show that the funds are either your own or come from a source that is acceptable to both the lender and HUD. Acceptable sources include savings, proceeds from the sale of a property, other owned assets, or a bona fide gift from a close family member. However, personal loans, credit card advances, or similar borrowed funds would not qualify.
If you sell the policy or withdraw funds available, show the terms of the sale or withdrawal and the receipt of funds through the deposit in your account. You cannot borrow against the policy for the down payment.
Yes, but the condominium project must be HUD-approved. There are also jumbo or proprietary programs for non-FHA-approved condos, but the HUD program is recommended for higher loan amounts and lower interest rates.
Yes, HUD allows up to four units in the reverse mortgage program if the property is owner-occupied.
To be eligible, you must occupy the property as your primary residence. If you move into an assisted living facility, the home will no longer qualify as your primary residence.
HUD is stricter on credit for the purchase program. If your credit issues were three years ago and your credit has been good since you might qualify with a strong letter of explanation. A lender must review your credit history first.
If your state permits a non-borrowing spouse arrangement for reverse mortgages, your spouse could be recognized as such from the start of the process. However, you must meet specific conditions, including attending mandatory counseling sessions and signing documents.
Yes, but the new home can only close once the new reverse mortgage lender has verified that the old loan is fully paid off. There may be a slight delay between the transactions.
Look for real estate professionals with experience in reverse mortgage transactions. Call a few real estate firms and ask if they have agents familiar with the program. Understanding HUD rules and requirements is crucial.
These updates make buying a home easier under the HECM for Purchase program by allowing more financial support from various sources.
For More Information:
ARLO recommends these helpful resources:
