The Realtors Guide to Reverse Mortgages for Home Purchase

Why Realtors Should Understand Reverse Mortgages for Home Purchase

The HECM for Purchase program (Home Equity Conversion Mortgage) is an FHA-insured loan that allows homebuyers aged 62 and older to purchase a new primary residence with no monthly mortgage payments.  This benefits your senior buyers, helps your sellers move their listings, and ultimately helps you close more transactions.

Yet many real estate professionals are unaware of this powerful tool—or they’ve heard myths that just aren’t true.  When used correctly, a reverse mortgage for purchase can close just as quickly (or faster) than a conventional loan.

Let’s walk through what you need to know.

What Is a Reverse Mortgage for Purchase?

A HECM for Purchase lets seniors buy a home using a combination of a substantial down payment and a reverse mortgage loan.  Borrowers keep the title in their name and never have to make monthly payments as long as they live in the home and meet basic obligations (paying taxes and insurance).

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
6267.2%$134,400$268,800$403,200$537,600$672,000
6565.1%$130,200$260,400$390,600$520,800$651,000
7061.4%$122,800$245,600$368,400$491,200$614,000
7558.5%$117,000$234,000$351,000$468,000$585,000
8054.1%$108,200$216,400$324,600$432,800$541,000
8547.9%$95,800$191,600$287,400$383,200$479,000
9040.9%$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 12/16/2024. Not a loan offer.

Curious how much you’d need as a down payment? Use our purchase calculator to estimate your required down payment based on your age instantly, the home’s value, and current interest rates.

Important HECM Purchase Rules to Know

✅ FHA-Insured with HUD Requirements
These loans are insured by the FHA, which means they follow specific HUD rules. Some of the key guidelines include:

  • Arm’s-Length Transactions Only: The buyer and seller must be unrelated.

  • No Property Flipping: Homes resold within 6 months (unless HUD REO) are not eligible.

  • New Construction Timing: No loan documents can be issued until the Certificate of Occupancy is received.

Down Payment Funds Must Be Verified

Like other FHA loans, all funds used for the down payment must be sourced and seasoned:

  • 3-month history is required on all funds.

  • If proceeds are from a recent home sale, provide the settlement statement.

  • Gift funds are allowed from close family, with a gift letter and paper trail required.

Tip: Advise your clients not to move funds between accounts to avoid complicating documentation.

The Importance of Fast, Accurate Closing Cost Estimates

Reverse mortgage rules prevent lenders from issuing applications until all closing costs are fully disclosed.  Once disclosed, those fees cannot change—so accuracy and speed matter.

Make sure you work with title and escrow partners who:

  • Know reverse mortgage timelines

  • Can provide exact fees within 24 hours

  • Understand the urgency of locking in borrower proceeds based on rate conditions

A delay of even a few days can significantly impact how much money your client qualifies to receive.

Underwriting: No Automated Pre-Approvals—But That’s OK

Unlike forward mortgages, HECM loans don’t offer automated desktop underwriting approvals.  However, lenders can still review:

  • Bank statements for down payment

  • Valid government-issued ID

  • Authorization to run credit reports

Based on this, your lender can issue a letter verifying that all borrower requirements are met—making the property the only variable.

Property and Appraisal Requirements

Since HECMs are FHA loans, they follow standard FHA appraisal and condition guidelines:

  • Repairs Noted by Appraisers Must Be Completed: “As-is” sales may not qualify unless issues are minor and quickly fixable.

  • Condo Requirements: Condominiums must be on HUD’s approved list. Approval takes 6–8 weeks, and not all projects qualify.

  • Unusual Properties: Manufactured homes, log cabins, earth homes, and unique properties with no comparable sales often won’t qualify.

Tip: If you’re unsure, check HUD’s condo approval list at HUD.gov.

HECM Purchases Can Close Fast—When You’re Prepared

If the property qualifies and title/appraisal issues are addressed upfront, a reverse mortgage purchase can often close in 30 days or less.

With this knowledge, you can confidently guide your older clients and differentiate yourself from other agents who don’t understand this powerful option.

Why Seniors Choose HECM for Purchase

This loan is ideal for clients who:

  • Want to downsize or age in place

  • Need to move closer to family

  • Prefer not to tie up all their funds in a cash purchase

  • Want to free up assets for lifestyle needs, healthcare, or travel

Unlike paying all cash, this program preserves liquidity while eliminating monthly mortgage payments.

Frequently Asked Questions

Q.

How does a reverse mortgage purchase differ from a traditional mortgage?

With a reverse mortgage purchase (HECM for Purchase), the buyer makes a one-time down payment and uses the reverse mortgage loan to finance the rest—without any monthly mortgage payments.  The borrower retains ownership and must live in the home as their primary residence.

Q.

Who qualifies for a reverse mortgage purchase?

Buyers must be 62 or older, plan to live in the home as their primary residence, and meet FHA’s financial assessment standards (credit and income review).  The property must be a single-family home, FHA-approved condo, or qualifying manufactured home.

Q.

How much does the buyer need to put down?

Down payment amounts typically range from 45% to 65% of the purchase price, depending on the borrower’s age, interest rates, and home value.
👉 Use our HECM purchase calculator to estimate a specific down payment.

Q.

Can sellers and agents treat reverse mortgage buyers the same as cash buyers?

Yes.  Since the reverse mortgage lender funds a portion and the buyer brings the rest as a large down payment, reverse mortgage purchase offers are nearly as strong as cash offers, with no financing contingencies once approved.
Q.

How long does it take to close a reverse mortgage purchase?

If prepared properly, reverse purchases can close just as quickly—if not faster—than traditional loans.  The key is early communication about the unique requirements (e.g., HUD counseling, property condition standards).

Let’s Talk—We’re Here to Help

If you’re working with a buyer aged 62 or older and want to learn more about the Reverse Mortgage for Purchase program, we’re ready to assist.

Contact All Reverse Mortgage, Inc. (ARLO™):
Call us Toll-Free at (800) 565-1722 or request a quote online.