Welcome to our guide on Purchase Reverse Mortgages! In this article, we explain how you can buy a new home with a special kind of reverse mortgage, making it easier to transition as you age. Whether you’re downsizing, moving to a more accessible home, or relocating closer to family, this guide is for you.
We’ll 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 decide 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 follows the same steps as any HECM loan.
Main requirements:
After getting a HECM for Purchase, borrowers must:
The key difference from buying then later getting a reverse mortgage is that the purchase happens in a single transaction, avoiding duplicate fees.
For a Reverse Mortgage Purchase, the borrower covers the down payment for the new home, including required mortgage insurance. This may cost more than a typical conventional mortgage, but it’s still less expensive than purchasing first and adding a reverse mortgage later.
A certificate of occupancy must be in place for new construction before completing a HECM for Purchase. Most property types are eligible, with noted exceptions below.
Certain manufactured homes may be ineligible, especially those built before 1976 or those that do not meet HUD manufactured-home standards.
With a reverse mortgage for purchase, the borrower must cover the down payment for the new home. While higher than many other financing types, there are no required monthly payments after the closing.
Many borrowers use equity from selling their current home. If that’s not enough, savings or other acceptable sources can fill the gap. If sale proceeds don’t cover the down payment, the borrower provides the difference in cash.
FHA allows certain sources — such as family gifts from parties with no interest in the transaction — to help with the down payment. If you plan to use gift funds, discuss documentation requirements with your lender.
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 shows examples by home price and 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. | ||||||
Common sources:
The most common sources are sale proceeds and savings. The Federal Housing Administration accepts various funding sources.
Acceptable sources include:
All funds must be verified. Gifts from anyone involved in the transaction are not acceptable. Less common sources (e.g., collateralized loans, savings bonds, employer assistance) may also be allowed with documentation.
Not acceptable:
Example: A 70-year-old uses a reverse mortgage to buy a $400,000 home. The required down payment is $182,000 (about 45%). For illustration, assume a 4% annual home appreciation and an “expected rate” based on a 10-year index.
Under these assumptions, equity could be ~$210,000 in five years and ~$257,000 in ten years without making monthly mortgage payments. If the borrower later moves to assisted care, the loan becomes due. The home can be sold; any equity above the loan balance belongs to the borrower or heirs.
When that time comes, you can:
Equity outcomes depend on appreciation, interest rates, timing/amount of draws (purchase funds are disbursed at closing), and any voluntary prepayments.
Also see: an ideal Reverse Mortgage Purchase example
| 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 to move during retirement without monthly mortgage payments. However, like all loans, there are trade-offs.
Select a real estate agent with experience in reverse-mortgage purchases. Your originator can help, but an agent who is familiar with HUD rules can streamline the process.
| 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 |
Yes. Reverse mortgages have been available for purchases since 2008, allowing buyers to avoid two separate closings.
Loan proceeds are based on the age of the youngest borrower/spouse and interest rates. You bring funds to closing to cover the difference.
It depends on age, rates, and HUD limits. Use the HECM purchase calculator for specifics.
Yes. Funds must be your own or from acceptable sources (e.g., verified savings, sale proceeds, or a bona fide family gift). Borrowed funds like credit card advances are not allowed.
Yes, if you withdraw or sell the policy and document receipt of funds. You cannot borrow against the policy for down payment funds.
The appraisal must be at or above the sales price. HUD uses the lower of sales price or appraised value.
Yes, if the project is HUD-approved. Some proprietary programs may allow non-FHA condos, but HUD HECM often offers better terms.
Yes. HUD allows up to four units if the property is owner-occupied.
You must occupy the home as a primary residence. Moving out makes the loan due per HECM rules.
Possibly, with re-established credit and a strong letter of explanation. A lender review is required.
In states that allow it, yes — with counseling and required documentation. See non-borrowing spouse rules.
You can sell anytime without prepayment penalties. If HUD incurs a loss from early departure on a prior HECM, you may be ineligible for another reverse mortgage until the loss is repaid.
Yes, but the new purchase can only close after the prior HECM payoff is verified, which can add a brief delay.
Look for agents experienced with HECM purchases. Ask firms if they have HECM-savvy agents familiar with HUD rules.
“All Reverse Mortgage flawlessly handled my reverse mortgage purchase, providing clear explanations and great professionalism. They promptly answered my questions and returned calls quickly. 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. Call (800) 565-1722 or try our reverse mortgage purchase calculator to see how much home you can afford.
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