How much is the down payment required on a reverse mortgage purchase?

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%.

Does it matter where the money for the down payment comes from for a reverse mortgage purchase?

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.

How can I use a life insurance policy to get the cash necessary for the down payment on HECM for purchase?

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.

Should the reverse mortgage purchase appraisal be near the asking price or just over the loan amount?

The appraisal must be at or above the sales price. HUD will use the lower of the purchase price or appraised value to determine the loan amount.

Are condos eligible for the purchase reverse mortgage?

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.

Can I purchase a multifamily property with a reverse mortgage and live in one of the units?

Yes, HUD allows up to four units in the reverse mortgage program if the property is owner-occupied. Q. Can you use a reverse mortgage purchase loan and then move to a nursing home? 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.

Can you use a reverse mortgage purchase loan and then move to a nursing home?

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.

Can I purchase with a reverse mortgage if I had a bankruptcy three years ago?

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.

Can my spouse use a reverse mortgage to purchase the home as the sole owner?

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.

Can you sell the house, and if so, are there time constraints or limitations?

You can sell the home at any time without restrictions or penalties. If HUD incurs a loss due to early departure, you would be ineligible for another reverse mortgage until the loss is repaid.

Is it possible to sell a home with an existing reverse mortgage and use the proceeds to buy a new one with a new reverse mortgage, allowing both transactions to close simultaneously?

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.

How can I find realtors who understand HECM for purchase?

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.

2025 Guide to Reverse Mortgage Purchase (HECM Purchase)

Q: Can you get a reverse mortgage on a purchase?

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.

Q: How does a reverse mortgage purchase work?

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.

October 22, 2025

Michael G. Branson Edited by

Cliff Auerswald

16 comments

Updated: 10/22/2025

Welcome to our 2025 Guide to Reverse Mortgage Purchase (HECM for Purchase). This year’s update reflects the latest HUD rule changes, including new allowances for 6% seller contributions, expanded gift funding options, and updated property requirements.

If you’re planning to move, downsize, or relocate closer to family, a reverse mortgage can help you buy your next home without taking on monthly mortgage payments.

In this guide, we’ll walk through how the purchase program works, the recent 2025 policy updates, and what these changes mean for you in real-world terms.

ARLO handing key to purchase home using reverse mortgage

Table of Contents

• Reverse Mortgage Purchase Basics

• Residency and Eligibility

• Ineligible Properties

• Estimating Your Down Payment

• Acceptable Funding Sources (2025 Update)

• Typical Down Payment Range

• 2025 HECM Purchase: Down Payment Estimates by Age

• Seller and Third-Party Contributions (HUD Update 16-5)

• Example of Reverse Mortgage Purchase

• 2025 Reverse Mortgage Purchase Rates: Fixed vs. Adjustable

• 2025 Reverse Mortgage Purchase: What You Need to Know at a Glance

• Pros and Cons of Purchasing with a Reverse Mortgage

• Additional Considerations

• 2025 HECM Purchase Changes & Improvements (Summary)

• Frequently Asked Questions

Reverse Mortgage Purchase Basics

The HECM for Purchase (H4P) is an FHA-insured reverse mortgage that helps you buy a new home while financing part of the purchase with your home’s equity. You’ll use your own funds for a down payment, and the reverse mortgage covers the rest, letting you own your new home without required monthly mortgage payments as long as you live there.

To qualify, you must:

Be at least 62 years old.
Meet HUD’s financial guidelines for income and credit.
Provide a sufficient down payment (the amount varies by age and interest rate).

After closing, you must:

Move in and make the home your primary residence within 60 days.
Keep the property in good repair and in compliance with FHA standards.
Stay current on property taxes, homeowner’s insurance, and HOA dues (if applicable).

The most significant benefit of the H4P program is convenience. You buy your home and set up your reverse mortgage in a single transaction, avoiding the extra costs and delays of taking out a separate 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.”

Residency and Eligibility

HUD now requires that all HECM borrowers be U.S. citizens or lawful permanent residents. Borrowers with temporary or non-permanent residency status (such as work or visitor visas) are no longer eligible for FHA-insured reverse mortgages, including the HECM for Purchase program.

If you’re a U.S. citizen or hold a green card, you fully qualify under the current residency rules.

Sign showing HUD-approved property types

The HECM for Purchase program allows a wide range of home types, as long as they meet FHA standards and the property will be your primary residence.

Eligible properties include:

Single-family homes
Planned Unit Developments (PUDs)
2–4 unit dwellings (you must live in one of the units)
HUD-approved condominiums
Manufactured homes built after June 15, 1976

If you’re buying new construction, the final Certificate of Occupancy must be issued before closing.

Did You Know? HUD-approved condos, single-family homes, and 2–4 unit properties qualify. However, co-ops, homes still under construction, and older manufactured homes (built before June 15, 1976) are not eligible for HECM financing.

Ineligible Properties

Not every home type qualifies for a HECM for Purchase. HUD limits eligibility to ensure the property meets safety and long-term habitability standards.

Ineligible property types include:

Homes still under construction or not yet habitable
Mobile or modular homes not set on a permanent foundation
Co-ops, boarding houses, or bed-and-breakfast properties
New construction without a final Certificate of Occupancy

Important:
Certain manufactured homes may not qualify, particularly those built before 1976 or those that fail to meet HUD manufactured home requirements.

Estimating Your Down Payment

When you buy a home using a HECM for Purchase, you’ll need a larger down payment than with a traditional mortgage, but in exchange, you’ll have no required monthly mortgage payments for as long as you live in the home.

Most borrowers use the equity from the sale of their previous home. Others combine personal savings, retirement funds, or eligible gifts to meet the requirement.

Acceptable Funding Sources (2025 Update)

HUD now allows several documented, non-repayable sources to help cover your down payment:

Proceeds from the sale of your current or prior home
Verified savings, retirement, or investment accounts
Family gifts, employer assistance, or disaster-relief grants
Other non-repayable funds approved by your lender

All funds must be fully documented, typically by wire transfer or cleared check before closing. Borrowed funds, unsecured loans, and credit-card advances are not permitted.

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.”

Typical Down Payment Range

The required down payment depends on:

Age of the youngest borrower or spouse
Current expected interest rate
Home price or the 2025 HECM lending limit of $1,209,750, whichever is lower

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

Your Age	% Down	$200,000 Home	$400,000 Home	$600,000 Home	$800,000 Home	$1,000,000 Home
62	64.9%	$129,800	$259,600	$389,400	$519,200	$649,000
65	62.8%	$125,600	$251,200	$376,800	$502,400	$628,000
70	59.2%	$118,400	$236,800	$355,200	$473,600	$592,000
75	56.4%	$112,800	$225,600	$338,400	$451,200	$564,000
80	52.1%	$104,200	$208,400	$312,600	$416,800	$521,000
85	46.1%	$92,200	$184,400	$276,600	$368,800	$461,000
90	39.5%	$79,000	$158,000	$237,000	$316,000	$395,000

(Down payment estimate includes closing costs, 2% insurance fee, at 5.75% rate / 5.5% expected rate as of 09/18/2025)

Seller and Third-Party Contributions (HUD Update 16-5)

As of 2025, HUD has updated HECM for Purchase rules to match conventional “forward” mortgage standards. Now, sellers, agents, and builders can contribute up to 6% of the home’s sales price or appraised value (whichever is lower) toward the buyer’s allowable closing costs and fees.

These contributions can be used for:

Origination and lender fees
Appraisal and credit-report costs
Title and escrow/closing fees
Prepaid taxes and insurance
Discount points or interest-rate buydowns
The initial FHA mortgage insurance premium (MIP)

Note:

Typical seller-paid expenses, such as real estate commissions or home-warranty costs, do not count toward the 6% cap.
PACE liens: If a seller pays off a Property Assessed Clean Energy (PACE) lien, it’s not treated as a contribution; it’s a required title condition under HUD’s updated rules.

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

Lending Limit	Fixed Rate (APR)	Adjustable Rate
$1,209,750 (HECM)	7.56% (8.06% APR)	6.885% (2.125% Margin)
$4,000,000 (Jumbo)	8.99% (9.25% APR)	9.52% (5.875% Margin)
Note: Fixed APR example: 7.56% + 0.50% MIP =8.06% total interest for a $250,000 loan, including standard closing costs.

2025 Reverse Mortgage Purchase: What You Need to Know at a Glance

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

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.

Pros & Cons

Pros

Government insurance with non-recourse protections (you never owe more than the home’s value at sale).
Single transaction: buy the home and set up the reverse mortgage at the same closing.
Eliminates required monthly mortgage payments while you enjoy your new home.

Cons

Potential downsides for some borrowers; heirs may receive less after the loan is repaid from sale proceeds.
Upfront and ongoing MIP plus standard closing costs apply.
Not suitable for everyone; compare with alternatives and consult trusted advisors.

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.

2025 HECM Purchase Changes & Improvements (Summary)

6% seller/agent/builder contribution cap toward allowable borrower costs
Expanded down-payment sources: verified gifts, employer assistance, or disaster-relief grants
PACE lien payoffs excluded from concession limits
Final Certificate of Occupancy required before closing
Residency limited to U.S. citizens and permanent residents
Trust ownership allowed at closing if FHA-compliant

Frequently Asked Questions

Can you get a reverse mortgage on a purchase?

How does a reverse mortgage purchase work?

How much down payment is required?

Does the source of down payment matter?

Can life insurance proceeds be used for the down payment?

Must the appraisal match the asking price?

Are condos eligible?

Can I buy a 2–4 unit property and live in one unit?

What if I later move to assisted living?

Can I qualify after a bankruptcy three years ago?

Can my spouse be a non-borrowing spouse and I remain sole owner?

Can I sell the home later? Any restrictions?

Can I sell a home with a HECM and buy another with a new HECM the same time?

How do I find realtors who understand HECM for Purchase?

“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:

Federal Register update: federalregister.gov

ARLO recommends these helpful resources:

Client success story in Kiplinger’s Retirement Report

America's #1 Rated Reverse Lender Celebrating 20 Years of Excellence.

Have a Question About Reverse Mortgages?

Look no further. Michael G. Branson, our CEO, brings a wealth of knowledge directly to you. With a robust 45-year tenure in mortgage banking and 20 years dedicated solely to reverse mortgages, he's the expert you want on your side.

Post your question in the comments below and anticipate a personalized response from Mr. Branson himself, typically within one business day. He's here to illuminate all angles of reverse mortgages, ensuring you're equipped with the knowledge to make informed decisions. Take this opportunity to gain insights from a seasoned professional.

16 Comments on this Article

Sonya
August 23rd, 2024

What is the credit requirement for a reverse mortgage purchase of a new home?
Reply to Sonya
- Michael Branson
  August 23rd, 2024
  
  Hello Sonya,
  HUD does not have a minimum credit score requirement for a reverse mortgage. Instead, they state that the borrower must demonstrate good overall credit and an excellent payment history on their property charges. Typically, this means you should not have any late payments in the last 24 months on your home mortgage, rent, taxes, insurance, or other property-related charges (such as HOA dues). Additionally, borrowers should generally have a strong history of paying their credit obligations on time.
  HUD does allow lenders to make judgment calls in certain situations where the borrower has shown that they are back on track with all obligations and that the events leading to the temporary lapse in payment history were beyond their control. For example, loss of employment, death, or other circumstances outside the borrower's control can sometimes be explained. However, even in these cases, you would need to provide satisfactory documentation that clearly connects the events to the credit issues and shows that these concerns are now resolved.
  HUD is generally more concerned with the borrower's credit habits when purchasing a new home than with a refinance transaction. However, that doesn't mean a well-documented event beyond your control would automatically disqualify you from purchasing with a reverse mortgage. The best approach is to be completely honest with your lender from the beginning about any credit issues you have. This allows them to have an underwriter review your credit issues, explanations, and documentation upfront. The last thing you want is to make an offer on a home only to have an issue arise later that could have been addressed earlier.
  Reply to Michael
Marilyn
March 17th, 2024

I am 71 (as of November 2023) and am thinking about buying a condo or a single family home with a reverse mortgage purchase. The purchase price will be approximately $500,000. How much down payment would I need to come up with?
So once I make that down payment, is that all the money I have to come up with and never HAVE to make a monthly payment?
Also how do I know which condos qualify for reverse mortgages?
At present I have 2 condos that have no mortgages (together totaling equity about $400,000. Which would you recommend -sell one or both condos and use for down payment OR keep condos for rental income and/or sell just one condo and try to come up with rest of down payment?
If I use money from sale of condo, would I need to get a bridge loan to do the reverse mortgage purchase?
Thanks
Reply to Marilyn
- Michael Branson
  March 19th, 2024
  
  Hello Marilyn,
  The amount needed would depend on closing costs in your area and interest rates at the time. I encourage you to contact us so that we can go over the programs and numbers. If you are not close to being ready and are just "testing the waters," you can always go to our website as well, at https://reverse.mortgage/purchase-calculator, and get a quote for your circumstances with accurate costs for your area if you are sure to include the zip code for the property you are considering.
  Once you make the down payment, you never need to make a monthly mortgage payment. However, you do need to pay your taxes, insurance, and any property charges (such as HOA dues for a condo). That would also include any maintenance on the home. After all, you own the home, and if it appreciates, the increase in value is yours as well.
  If you are considering a condominium. The project must be approved by HUD. You can go to the HUD website at https://entp.hud.gov/idapp/html/condlook.cfm to look up a prospective project to see if it is on HUD's approved list. The easiest way I've found is to go to the first page, input the zip code where you are looking, and hit enter. That will give you a list of all the projects HUD has reviewed in that zip code. Find your project as they are listed in alphabetical order by name.
  Remember to check them all carefully by name and address, as some are listed by the name of the project and some by the name of the Homeowner's Association, depending on how they were submitted. If you do not see your project, it has not been submitted and HUD will not insure a loan in the project until after they receive a package of everything they need and determine that the risk is acceptable. This is a bad property for a reverse mortgage purchase as there is no way to know that a project approval can be done in time to complete your purchase transaction or that the project will even meet HUD guidelines and you will have a deposit at risk if you extend beyond the timeframe, you must cancel and still receive your deposit back which is usually just 17 days.
  Remember, many projects are rejected outright by HUD or withdrawn because they do not meet HUD requirements, and you do not want to find this out after you have exceeded your timeframe to cancel your offer and receive your deposit back unless you are prepared to complete the purchase with other funds or financing. Be sure to look at the status of the project in the third column from the right and that the project's status is "Approved". Some buyers mistakenly think that just because the project is on the list, it is clear to proceed, but if the project is canceled, withdrawn, rejected, or expired, HUD will not insure a loan for that project at that time.
  Just because a condo project qualified in the past does not mean it will qualify at the time you apply. The lender still has to gather specific information to determine whether the project qualifies. Too many rentals, a lawsuit against the HOA, or a sudden drop in reserves against losses are just some of the reasons that the project may no longer be eligible for the FHA insurance/HUD program.
  I cannot advise you on your finances, so you can only decide if it is best for you to sell a property or keep it for rent, etc., but I can tell you that you cannot use borrowed funds for the down payment. For this reason, the bridge loan is off the table. You can sell the other properties if you wish, and any funds you use for the down payment must be fully sourced (bank records if they were in an account, closing statements if from the sale of property, etc.). Your loan officer can discuss options with you and run different scenarios based on the down payment you would need for different properties.
  Reply to Michael
Roberta E.
August 10th, 2021

If I want to buy a piece of property using the reverse mortgage loan how does that work?
Reply to Roberta
- Michael Branson
  August 10th, 2021
  
  Hi Roberta,
  
  Just like any other loan. You find the home you want to buy and instead of using another type of loan, you use the reverse mortgage proceeds plus your down payment to close the transaction.
  If you would like to know more about the amount of down payment you would need for a purchase transaction, you should contact us with the property address (or at least the zip code in which you are looking), the approximate price you want to pay and from that we can tell you the most probably costs and how much you will need for a down payment.
  Because reverse mortgage benefits vary by age and costs vary by region/location, people closing purchases in areas where the state and counties charge more for documentary transfer taxes, etc. will see higher closing costs than areas that do not have these fees.
  You need to figure that you will probably be putting around 50% down on the home but that may change if you are older or if the fees are higher but that is a good starting point. We can give you a solid number with some actual information.
  
  Once you know how much money you need for down payment and closing costs, you shop for your home and make your offer just as you would with any other loan. The one difference is that you need to be sure that the type of property you are looking to buy is acceptable to the HUD program.
  Condominiums are not very feasible if they are not already on the HUD approved list and manufactured homes are difficult if there are not multiple recent sales of similar properties in the area.
  But the best thing to do is to speak with a reverse mortgage Loan Officer to determine if the program will accommodate the type of property you wish to buy before you even start looking.
  Reply to Michael
Daisy
November 24th, 2020

Hi Arlo,

We closed our home using a purchase reverse mortgage, October 2020 in Texas. Our Deed only has our names listed. Our marital status and vesting of joint tenancy with rights of survivorship were omitted. We did not catch it until we received the recorded Warranty Deed 10 days after closing. We were told by the mortgage company that the new servicer can call our note if we get the vesting corrected. Therefore, they will not produce a Corrective Deed. In addition, they said "Too bad your loan is closed." How is that possible? All homes we owned over the years had this vesting on conventional loans. We feel so abandoned. :(
Reply to Daisy
- Michael Branson
  November 24th, 2020
  
  Hello Daisy,
  
  Firstly, I believe that is just wrong.
  Your loan documents specifically state that you can add others to title, or you can change the title to an approved family trust as long as at least one original borrower remains on title and still lives in the property as your primary residence.
  Your documents say nothing about the vesting and lenders only have the rights in your property that you give them when you sign your agreements/loan documents. I cannot say for sure, but I believe your originator may just not be aware of how to accomplish this and so they are taking the easy way out for them.
  If you want the Deed corrected to include your marital status and right of survivorship, I suggest you have the Deed to correct the vesting drawn as you wish it to be and send a copy to the servicing department along with your explanation that you are not changing the owners, that you both still occupy the property as your primary residence and that you are simply correcting the vesting.
  I would copy the title company who first handled the purchase transaction as well referencing the original title order. Ask them to specifically authorize the title company to record the Deed to correct the vesting. This accomplishes several things.
  Firstly, you will not have an "uninsured Deed" that could present issues later. Secondly, you will have the lender's acknowledgment and authorization before you ever record the Deed so if there is further contention, you can resolve it before any change of title is recorded.
  I do not believe there will be an issue, but some people look for problems where there are none or may need some convincing. Finally, by having the original title company from the home purchase involved in the recording of the new Deed, they can be sure that they do it so that it does not trigger any reassessments due to change of ownership that might occur if it is not done correctly.
  Once the lender approves the Deed to correct the vesting, request the title company to record it and send them the original Deed for recording.
  
  If all of this fails and the lender digs their heels in (which I cannot see why they would), then you may need to consult with an attorney to determine the effects of the omission in the first place (whether or not having the vesting changed really will or could make any difference later) and to have them become involved by contacting the lender on your behalf if needed.
  I am not an attorney and I do not know what legal ramifications could occur, if any, with the omission of the wording you seek to add or if it is a totally moot point. I do know that Texas has strong heirship laws and so if you cannot get the changes you seek, you really should speak with an attorney to determine any possible effect that could have on your title, yourselves or your heirs later.
  Reply to Michael
Joan
May 26th, 2020

Hello ARLO,

I am a healthy and active eighty-year-old renting in Sedona, Arizona, currently paying $1235 per month. My landlord is raising the rent $345.

My monthly income is a little over $2,000, most of which is Social Security and a federal pension annuity, plus money from acting and an at-home editing and transcription business.
I have $30,000 in savings, a good credit score and no debt.

I want to learn the maximum I can qualify for with an HECM purchase loan. How do I go about this?
Reply to Joan
- Michael Branson
  May 26th, 2020
  
  Hello Joan,
  
  Your income is not a problem. Under the residual income method of qualification that HUD uses, you have ample residual income to qualify for any home as long as you still have about $590.00 per month left to live on after pay all your obligations which include your home costs and any debts.
  Since you have no debts, this would be your taxes, insurance and a 14 cents per square foot utility and maintenance factor for the home (on a 2,000 square foot home that would be $280 per month).
  Even if your taxes were $600 per month, your insurance another $150 per month and your utility/maintenance factor $280 per month, your total obligations would be $1,030 per month giving you just under $1,000 residual income (at $2,000 per month total income) and that would qualify you from an income standpoint because you need $590.00.
  
  Where you will find you have a problem is with the down payment requirement. Because you can live in the home for life with no payments required, the down payment will be higher than it looks like you have available (plus costs). At age 80, the program will lend 64.2% of the home's value.
  Taking a quick look at homes currently listed in Sedona, other than manufactured homes that often do not meet HUD requirements, I do not see any that are currently listed for less than $155,000 which is a small condo and I do not know if the condo project is approved. That would be a down payment of approximately $55,500 plus costs.
  
  If you look at manufactured homes or condominiums, you need to remember there are additional requirements that the properties must meet to be eligible for HUD financing.
  Considering your liquidity is $30,000, you would really need to keep your top purchase price at or below about $57,000 to be able to put down the required down payment of $20,406 and pay the costs associated with the loan and closing the sale.
  You may be able to tweak these numbers if you find a property with a seller willing to pick up some of the closing costs but even then, the price of the home would not rise drastically.
  Reply to Michael
Joe Gerstein
January 14th, 2013

I am purchasing a new house. I was going to get a conventional mortgage and deposited a lot of money with the builder several months ago to complete the home. The home appraises at $425,000. I gave him $170,000 which he still has most of it. We are living in the house until we get a mortgage. How can I meet the down payment requirements for a reverse mortgage since he has the money?
Reply to Joe
- Michael Branson
  January 15th, 2013
  
  Hi Joe,
  The reverse mortgage only requires that you verify the down payment, the transfer of the money and then the source of the funds. If the contract between you and the seller calls for you to deposit $170,000 at the time the contract was signed, you would have to show that you had the funds to deposit that amount at the time you made the deposit, a copy of the cancelled check showing the transfer of the funds and a minimum of three months prior statements to show that the funds were available for three months before they were given to the builder. Depending on your age and benefits under the program, you may need to verify additional funds and they would need to go through the same sourcing routine.
  Reply to Michael
Jeff
November 26th, 2012

Hi,
I am 71 years old, and I am deciding to buy a new home in Orange county ca. I have 300000
for down for a single family cost about 450000. Can I get 150000 dollars as reverse mortgage? how much interest and other cost. Can I pay interest amount yearly.
Reply to Jeff
- Michael Branson
  December 4th, 2012
  
  Hi Jeff,
  Yes to all of the above! And you have several options you can use to do it. You could choose to use a fixed rate, but then you would have to take a full draw of the amount available to you and that would be more than $150,000. However, if you really want a fixed rate mortgage, you could use the fixed rate reverse mortgage and pay back any portion of the funds you did not want at any time without penalty. For example, I don't have your exact date of birth or know your fees so these are estimates, but at 71 years of age, you would be eligible for approximately $301,950 and after the fees, you would have somewhere in the neighborhood of $290,786 paid toward the purchase price with the reverse mortgage leaving you needing to bring in approximately $159,214 (these numbers are approximations in that I do not know if you are 71 but will be 72 within 6 months which would make your benefit amount higher or what your actual closing costs would be).
  But with the fixed rate program, if you did not want to have this high a mortgage and wanted to pay down that amount, you could do so without penalty at any time and yes, you could also pay any amount per year that you wanted to keep your balance down as well after that. You just have to remember that any repayment is credited first to HUD mortgage insurance premiums, any outstanding fees, then to interest and then to principal. The net effect is the same on the amount of interest that you pay as any repayment lowers the amount of interest you pay, but it can effect interest deduction on any repayments.
  Then you can also consider purchasing with an adjustable reverse mortgage and you can use any amount you desire. With the adjustable reverse mortgage, you can take only the amount you want ($150,000), pay the rest of the purchase price yourself and then the remaining portion of the reverse mortgage would be available to you later in a line of credit that you could access at any time. You do not HAVE to borrow the funds ever, but they would be there if you needed them and you do not pay interest on them if you do not borrow them. The line of credit grows on the unused portion so at the end of 10 years, the $138,000+/- line of credit would grow to $225,000+/- so you would have more funds available to you if needs at that time. The costs would vary with the type of loan you chose and you could even lower them significantly by using the Saver program with the line of credit and lower your costs by almost $9,000 up front on the HUD mortgage insurance premium (but you would also have a lower credit line available to you after the close of the loan than outlined above).
  So regardless of your preference, whether you want a fixed rate or an adjustable loan, there is a way to allow you to purchase with a reverse mortgage and accomplish exactly what you are trying to do. I would encourage you to contact us so that we can show you all the scenarios tailored to your parameters.
  Reply to Michael
  - Barb H.
    July 26th, 2024
    
    Hi,
    
    I am 81, currently in a reverse mortgage, and I want to sell this house, pay off the reverse mortgage (about $202,000), and purchase a townhouse with a reverse mortgage. My house is expected to sell for about $460,000, so I will have the down payment, I think.
    
    My income is about $2,700 per month. The HOA is $235, and taxes are $1,000 per year. How can I find out how much HVAC and other fees will be in this townhouse? Does the lender do this and tell you if you can afford the home? Do I have to do counseling again, even though I already did it twice - once at sale, once at refinance?
    
    Thanks for your help!
    Reply to Barb
    - Michael Branson
      July 29th, 2024
      
      Hello Barb,
      You can ask the agents what the utilities have been running, but remember, costs for things like HVAC, electric, gas, etc., can really depend on factors such as usage and peak usage charges. If there are more people living in the home now, their charges may be higher. Alternatively, if their lifestyle is such that they are out of the home during peak hours, their costs may be less than yours if you are home all day and need to run HVAC all day.
      I found a good article online from a company called Shiply Energy that discusses steps you can take to estimate costs in advance, including an energy survey you can request if you are still concerned: How to Estimate Utility Costs When Moving into Your New Home. You may want to look at their information and discuss it with your real estate agent.
      Neither the lender nor the counselor can provide an accurate statement of utilities to determine your qualification for the loan. Under the HUD financial assessment guidelines, the lender uses a factor based on the square footage of the unit to determine if you qualify. I have heard they are reviewing this portion of their financial assessment requirement, and it may change in the future. However, at this time, the lender will determine eligibility by knowing the size of the property, your income, and your total monthly obligations (including taxes, insurance, and any HOA fees).
      Regarding the counseling, yes, you will need to complete it for this transaction so that the lender and HUD have a certificate corresponding with this case number. You may or may not be located in a state that also requires counseling with every reverse mortgage loan. It may seem duplicative in some cases, but it is for the protection of the homeowner.
      Reply to Michael

2025 Guide to Reverse Mortgage Purchase (HECM Purchase)

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2025 Guide to Reverse Mortgage Purchase (HECM Purchase)

Reverse Mortgage Purchase Basics

Residency and Eligibility

Ineligible Properties

Estimating Your Down Payment

Acceptable Funding Sources (2025 Update)

Typical Down Payment Range

2025 HECM Purchase: Down Payment Estimates by Age

Seller and Third-Party Contributions (HUD Update 16-5)

Example of Reverse Mortgage Purchase

2025 Reverse Mortgage Purchase Rates: Fixed vs. Adjustable

2025 Reverse Mortgage Purchase: What You Need to Know at a Glance

Pros and Cons of Purchasing with a Reverse Mortgage

Pros & Cons

Additional Considerations

2025 HECM Purchase Changes & Improvements (Summary)

Frequently Asked Questions

Can you get a reverse mortgage on a purchase?

How does a reverse mortgage purchase work?

How much down payment is required?

Does the source of down payment matter?

Can life insurance proceeds be used for the down payment?

Must the appraisal match the asking price?

Are condos eligible?

Can I buy a 2–4 unit property and live in one unit?

What if I later move to assisted living?

Can I qualify after a bankruptcy three years ago?

Can my spouse be a non-borrowing spouse and I remain sole owner?

Can I sell the home later? Any restrictions?

Can I sell a home with a HECM and buy another with a new HECM the same time?

How do I find realtors who understand HECM for Purchase?

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