Updated: 9/19/2025

Welcome to our guide on Purchase Reverse Mortgages!  In this article, we explain how you can buy a new home utilizing a reverse mortgage loan, 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 purchase program works, to help you decide if this option is right for you.

Reverse Mortgage Purchase Basics

The HECM for Purchase is the most common reverse mortgage used to buy new homes.  Applying for and qualifying for a HECM Purchase loan follows the same steps as any other HECM loan.

Main requirements:

• Borrowers must be 62 or older and meet HUD financial guidelines.
• Borrowers make a significant down payment; the reverse mortgage covers the rest, with no required monthly mortgage payments.

After getting a HECM for Purchase, borrowers must:

• Occupy the home as your primary residence and move in within 60 days
• Maintain the home to FHA standards.
• Pay property taxes and homeowners’ insurance on time.
• Pay other property charges, like HOA dues.

The key difference from buying and 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.

Expert Insight from Michael Branson, CEO: “The HECM for Purchase is ideal if you’re downsizing or moving closer to family, it simplifies the move into one transaction.”

Eligible Properties

• Single-family homes
• Planned Unit Developments (PUDs)
• 2–4-unit dwellings
• HUD-approved condominiums
• Manufactured homes (built after June 15th, 1976)

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.

Did You Know? Eligible properties include HUD-approved condos, single-family homes, and 2–4 unit residences.  However, co-ops, homes still under construction, and manufactured homes built before June 15, 1976, do not qualify.

Ineligible Properties

• Homes under construction and not yet habitable
• Mobile Homes
• Co-ops, boarding houses, and bed-and-breakfasts
• New construction without a Certificate of Occupancy

Certain manufactured homes may be ineligible, especially those built before 1976 or those that do not meet HUD manufactured-home standards.

Estimating Your Down Payment

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 mortgage 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 the sale proceeds don’t cover the down payment, the borrower provides the difference in cash.

FHA allows specific 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:

• Age of the youngest borrower or spouse
• Current interest rates
• Home price or the HECM lending limit of $1,209,750 (whichever is less)

Typically, the down payment for an HECM for Purchase is between 40-60% of the purchase price.  The table below shows examples by home price and age.

Did You Know? Your down payment typically ranges between 40-60% of the purchase price, depending on your age and current interest rates.

2025 HECM Purchase: Down Payment Estimates by Age

Sourcing Your Down Payment

Common sources:

• Proceeds from selling your home
• Savings, Retirement Funds, Investment Accounts, etc.
•  Gift from an immediate family member

The most common sources are proceeds from home sales and existing savings accounts.

Expert Insight from Michael Branson, CEO: “Most borrowers use equity from selling their current home. This lets them buy their next property without taking on a monthly mortgage payment, and without paying all cash.”

Down Payment Sources You Can’t Use

Not acceptable:

• Sweat equity
• Trade equity
• Rent credit
• Cash from anyone benefiting from the transaction
• Credit card advances or other borrowed funds

Example of Reverse Mortgage Purchase

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:

• Pay off the loan and keep the house
• Sell the home and keep any remaining proceeds
• Walk away and owe nothing (non-recourse)

Equity outcomes depend on appreciation, interest rates, timing/amount of draws (purchase funds are disbursed at closing), and any voluntary prepayments.

Also see: Ideal Reverse Mortgage Purchase Example

2025 Reverse Mortgage Purchase Rates: Fixed vs. Adjustable

Pros and Cons of Purchasing with a Reverse Mortgage

The HECM purchase program can be an excellent option to consider during retirement, allowing you to move without monthly mortgage payments.  However, like all loans, there are trade-offs.

Did You Know? FHA insurance guarantees a purchase HECM so that at the time of maturity, you’ll never owe more than your home’s value, no matter how long you live there or what the market does.

Additional Considerations

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.

Frequently Asked Questions

2025 HECM Purchase Changes & Improvements

1. Assistance with Borrower’s Fees: Sellers, agents, and builders can contribute up to 6% of the home’s cost toward borrower fees.
2. Uses of the 6%: Origination, closing costs (incl. credit reports/appraisals), prepaids, discount points, rate buydowns, and initial MIP (not counseling).
3. Additional Funding: Gifts, disaster-relief grants, and employer assistance can supplement your funds.
4. Seller Fees: Usual seller costs (commissions, home warranty) don’t count toward the 6% limit.
5. PACE Liens: Seller payoff of a PACE lien is not an interested-party contribution.

“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.

For more information:

• HUD.GOV HECM PURCHASE MORTGAGEE LETTER 2008-33
• Federal Register update: federalregister.gov

ARLO recommends these helpful resources:

• Client success story in Kiplinger’s Retirement Report