2024 Reverse Mortgage Purchase Guide: Rates, Limits & Down Payment

April 8, 2024

Reverse mortgages are a popular choice for individuals looking to remain in their homes as they age. However, a unique variant—the Reverse Mortgage Purchase—enables borrowers to buy a new home without paying all cash or taking a traditional mortgage.

Opting for a Reverse Mortgage Purchase can be particularly beneficial for various life situations.

Many find it an appealing option when considering the following:

The desire to downsize to a more manageable home, reducing the burden of upkeep.
The preference for a single-level dwelling that can better accommodate the needs of aging in place.
The need to move closer to family, ensuring support is within reach.

With a Reverse Mortgage for Purchase, often facilitated by the Home Equity Conversion Mortgage (HECM) for Purchase program, you can streamline the process, allowing you to secure a reverse mortgage and acquire a new residence seamlessly.

ARLO handing key to purchase home using reverse mortgage

Table of Contents

• Reverse Mortgage Purchases Basics

• Eligible Properties

• Ineligible Properties

• Estimating Your Down Payment

• HECM Purchase Down Payment Estimates by Age and Home Value

• Today's Reverse Mortgage Purchase Rates

• Sourcing Your Down Payment

• Down Payment Sources You Can’t Use

• Example of Reverse Mortgage Purchase

• Advantages and Disadvantages of Reverse Mortgage Purchases

• Additional Considerations

• Purchase FAQs

• 2024 Purchase Changes & Improvements

• HECM Purchase YouTube Series

Reverse Mortgage Purchases Basics

The HECM for Purchase is the most common reverse mortgage borrowers use to purchase new homes. Applying for and qualifying for a HECM for Purchase follows the same process as applying for any HECM loan.

Most requirements are the same:

Borrowers must be 62 or older and qualify under the HUD financial assessment guidelines. Instead of having equity in a home, borrowers must be able to put down a sizeable down payment, with the reverse mortgage covering the rest (with no monthly mortgage payments).

After completing a HECM for Purchase, borrowers must maintain the home to FHA standards and pay property taxes and homeowners’ insurance in a timely manner as well as any other property charges (i.e., HOA dues, etc.). The main difference between using a reverse mortgage for purchase and getting a reverse mortgage later is that with the purchase, it is all one transaction, and therefore, there are no duplicate fees.

The reverse mortgage for purchase product requires the borrower to cover the down payment on the new home purchase, which includes the required mortgage insurance that may be more a typical conventional home mortgage purchase but is still less than a purchase of any type and a reverse mortgage refinance later.

So, if your plans call for a reverse mortgage, a single reverse mortgage purchase is much better than a purchase and a subsequent refinance.

Picture of neighborhood with sign that says "HUD approved property types"

Eligible Properties

Single-family homes
PUD – planned unit development
2–4-unit dwelling
HUD-approved condominiums

In all cases of new construction, a certificate of occupancy must be in place before the HECM for a purchase transaction. Most property types can be purchased in a reverse mortgage, with several exceptions.

Ineligible Properties

The home must not be under construction and must be habitable. Co-ops, boarding houses, B&Bs, and newly constructed homes where a Certificate of Occupancy has yet to be issued are ineligible.

Certain types of manufactured homes may not qualify for reverse mortgage financing. Those built before 1976 will not.

HUD publishes its minimum standards for manufactured homes, and any properties that do not meet those standards are ineligible for a reverse purchase mortgage.

Estimating Your Down Payment

The reverse mortgage for purchase program requires the borrower to cover the down payment on the new home purchase. The down payment requirement for a purchase with a reverse mortgage is higher than most other types of financing, but then borrowers have no required monthly payments.

In many cases, borrowers use the equity from the sale of their existing house for the down payment on the new home. In other cases, the borrower may need to cover the down payment through savings or other means.

If the value of the old home is less than the down payment required for the new home, the borrower will need to provide the difference in cash. Some gifts and other sources may also be allowed under FHA requirements, such as family gifts from those who do not have a stake in the transaction.

If you need to use gift funds, you should always discuss with your lender so that you can verify the requirements for gift fund verification and eligibility in advance.

The down payment requirement is based on the following:

The age of the youngest borrower
Current interest rates
The price of the new home, or the HECM lending limit of $1,149,825

Typically, the down payment for a HECM for Purchase is 45-70% of the purchase price. The following table provides examples of down payment requirements for various home prices and borrower ages.

HECM Purchase Down Payment Estimates by Age and Home Value

Age	% Down	$200,000	$400,000	$600,000	$800,000	$1,00,0000
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	$163,600	$287,400	$383,200	$479,900
90	40.9%	$81,800	$163,600	$245,400	$327,200	$400,900

Please note that this is not a lending offer. The down payment figures provided are estimates, inclusive of the majority of essential closing costs, such as a 2% upfront mortgage insurance fee and third-party closing costs. These estimates are based on an interest rate of 6.93%, which includes an expected rate of 6.10% and an adjustable CMT margin of 1.625%, accurate as of December 4, 2023.

Today's Reverse Mortgage Purchase Rates

2024 Lending Limit	Fixed Rate	Adjustable Rate
$1,149,825	7.180% (8.700% APR)	6.885% (2.125 Margin)
$4,000,000	10.125% (10.612% APR)	11.385% (6.625 Margin)

Example calculation using fixed rate:
7.18% + .50% Monthly MIP = 7.68% in total interest charges. Fixed Rate APR calculated assumes a $250,000 loan amount and includes .50% Mortgage Insurance and standard 3rd party closing costs.

Sourcing Your Down Payment

Cash on hand (Savings, 401k, etc.)
Proceeds from the sale of the home
Gift from family

Proceeds from the sale of the previous home and savings are the most common ways for borrowers to meet the down payment requirement. There are other acceptable funding sources under the Federal Housing Administration, which is the insurer for the loan.

For sources that will work to finance the equity portion of the loan, borrowers can use an earnest money deposit or a withdrawal from a savings account, checking account, or retirement fund.

Some forms of gift money are also OK, including gifts from family members, employers, a charity, a government organization interested in home ownership initiatives, or a close friend with a documented interest in the borrower. All funds need to be verified.

Gifts from someone involved in the transaction, in any way, are not acceptable. Other less common funding sources, such as collateralized loans, savings bonds, employer assistance programs, and other means, can also be used.

Down Payment Sources You Can’t Use

Sweat equity, trade equity, rent credit, and cash from someone benefiting from the reverse mortgage transaction are unacceptable. Cash advances from credit cards are also not accepted.

Example of Reverse Mortgage Purchase

In this example, we will use a 70-year-old borrower with a reverse mortgage to purchase a home with a sales price of $400,000. The required down payment is $182,000, or approximately 45% of the purchase price.

No one can foretell interest rates or how much your home will appreciate over the years, so estimates are prepared using a 4% annual appreciation of the home, and the interest is calculated using an “expected rate” based on a 10-year index and not the lower index from which you begin to accrue interest.

Many properties appreciate more than 4% annually, but 4% is a solid, relatively conservative number. If you feel your home will appreciate more or less, you may want to keep that in mind while considering the numbers.

The down payment includes all upfront mortgage insurance premiums and third-party closing costs. After five years of making no mortgage payments, there would be $210,000 in home equity; after 10 years, there is still $257,000 based on the abovementioned assumptions.

Should the borrower decide to move into an assisted care facility later, the loan would become due and payable, but the borrower or their family can sell the home. The home and any equity in the home over the outstanding loan balance always belongs to the borrower and their heirs.

They can pay the loan off and keep the house, sell the home and keep the proceeds, or, in some cases, walk away and owe nothing.

The remaining equity largely depends on the home’s future appreciation, interest rates, the amount and timeliness of reverse mortgage funds drawn (which are 100% at inception on a purchase), and whether or not the borrower makes any early voluntary repayments.

Also See: Here’s an Ideal Reverse Mortgage Purchase Example

Advantages and Disadvantages of Reverse Mortgage Purchases

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.

Pros

For the government-insured HECM for Purchase, borrowers are afforded the same protections and benefits of all HECM loans, including its non-recourse feature, which means when the loan comes due, the borrower does not have to repay more than the home is worth at the time of sale.
The product allows borrowers to purchase a new home with a reverse mortgage, all in a single transaction.
The HECM for Purchase allows borrowers to eliminate their monthly mortgage payments while they enjoy a new home.

Cons

Like all mortgages, there can be a downside to reverse mortgages for some borrowers. When a borrower passes away, the borrower’s heirs may see reduced inheritance after the home’s sale and repayment of the loan.
Upfront and ongoing insurance premiums are required to maintain the loan and standard closing costs.
A reverse mortgage is only suitable for some, and it’s essential to consult with trusted advisors about the options available and how a reverse mortgage compares.

Additional Considerations

Another factor that borrowers may want to consider in purchasing with a reverse mortgage is the real estate agent’s experience with reverse mortgages. While the mortgage originator can help answer questions along the way, borrowers may want to work with a real estate agent familiar with reverse mortgage transactions.

Purchase FAQs

Can you get a reverse mortgage on a purchase?

Yes. The reverse mortgage has been available for purchase transactions since 2008. FHA implemented this to eliminate the need for borrowers interested in buying a new home to do two transactions.

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.

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

The amount of down payment required will depend on the borrower’s loan eligibility as determined by the HUD calculator. This determination is based on a calculation of factors such as the age of the youngest borrower/spouse, the interest rate, and the HUD lending limit to determine the HUD Principal Limit. The Principal Limit is the amount that the reverse mortgage will advance toward the transaction, and the borrower(s) would need to bring in the rest to complete the transaction. For example, a 62-year-old borrower may be eligible for a loan-to-value percentage of ~36%. A 92+-year-old borrower may be eligible for a ratio of ~65%, to which the borrower would also need to add any fees. Curious about your down payment? Try our reverse mortgage for purchase calculator.

How is a reverse mortgage purchase different from a traditional mortgage?

A reverse mortgage requires a larger down payment than a traditional loan purchase. This is due to a reverse mortgage not requiring any monthly mortgage payment. Additionally, a reverse mortgage purchase follows FHA guidelines with more regulations related to fees allowed to be paid by the seller, concessions from the seller, and property requirements. Also See: Purchase Reverse Mortgage Purchase FAQs (Updated 2024)

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, and if you move into an assisted living facility, the home will not qualify as your primary residence.

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

HUD does allow up to 4 units in the reverse mortgage program as long as the property is owner-occupied.

How can I find realtors who understand HECM for purchase?

A wealth of information is available to real estate professionals from HUD, industry sources, and HUD-approved lenders. However, many individuals still need help understanding the program or, even worse, still harbor many misconceptions. The best thing to do is call a few real estate firms in the area and ask if they have anyone in the office who has worked with purchase reverse mortgages. The program is not highly restrictive but does have definite requirements. Knowing those HUD rules and requirements can put you ahead of the game.

Does the reverse mortgage purchase appraisal need to be near the asking price or just over the loan amount?

HUD uses the same process on the reverse mortgage for purchase forward lenders use. They will use the purchase price or the appraised value, whichever is less, to determine your benefits (loan amount). So, the appraisal is at or above the sales price. In that case, the loan amount will be a percentage of the sales price (not the higher appraised value if it is above), depending on your age, as determined by the HUD calculator. This means that if the appraised value is $100,000 and the sales price is $75,000, the loan amount will be based on the sales price of $75,000 despite the higher appraised value. If the opposite were true, the appraisal comes in at $75,000. The sales price is $100,000. HUD would not only not insure a loan on the $100,000 purchase price, but lenders would also not complete the transaction as it would be deemed an abusive transaction to the senior (selling a home to them at $25,000 over market value).

Can I use funds from a cash-out refinance for the down payment on a HECM purchase?

HUD does not allow using borrowed funds for down payment purposes on the HECM for the purchase program. You must have the funds in your account, which must be seasoned to be eligible for use. The underwriter will ask for verification of the source of funds if there was a large deposit to the account during the 3 months before the application, but if the funds are seasoned (they have been in the account all along), there should be no issue.

Are condos eligible for the purchase reverse mortgage?

You can use a reverse mortgage to purchase a condominium. The only thing that could make this difficult is if HUD does not approve the condominium project, as the project must be HUD-approved before you can close a reverse mortgage loan in that project under the HUD HECM program. There are also jumbo or proprietary programs available that work for non-FHA approved condos, but I would recommend the HUD program first if at all possible as the loan amounts as a percentage of the value of the home would be higher, and the interest rates available would be lower.

Can I purchase with a reverse mortgage if I had a bankruptcy 3 years ago?

HUD is stricter on credit for the purchase program. If the only derogatory credit you have is all around this time, it was all 3 years ago, and all credit since that time is good. You have some documentation of the ailment; you may be OK with a strong letter of explanation, but you must let a lender pull your information and review it 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 (which Texas does not), you could be recognized as such from the start of the reverse mortgage process. However, maintaining this status requires adherence to certain conditions. Even if you aren’t a borrower, your marriage necessitates your participation in various stages, including attending mandatory counseling sessions and signing particular documents. Your status could change if you don’t live in the home or meet other specific conditions. It’s worth noting that being on the property title from the outset isn’t necessary, but this doesn’t exempt you from the counseling requirement or affect your standing as an eligible non-borrowing spouse when the loan begins. The HUD standards for credit in the purchase program are more stringent. If your credit issues are isolated to a period three years prior and all subsequent credit activity has been positive, coupled with documentation of the circumstances and a strong letter of explanation, you might still qualify. However, it’s critical to have a lender review your credit history first.

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

After obtaining a reverse mortgage through a purchase, you can sell with no specific time restrictions or limitations as you are the homeowner, and there is never a prepayment penalty. If you decide to sell the home without causing any financial loss to HUD from the initial transaction, you retain eligibility for securing another reverse mortgage on a different property, should you choose to do so. However, if HUD incurs a loss due to an early departure on your part (which is unlikely if you sell the property shortly after purchasing it), you would be ineligible for another reverse mortgage until the loss from the first loan is fully 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?

The answer is yes. However, the new home can only be closed once the new reverse mortgage lender has verified that the old loan has been fully paid off. Although it would be ideal if this process were instantaneous, HUD processes are not always that seamless. Ensure you have a backup plan for the move in case there is a day or two delay between the two transactions.

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 built up and available to you, you would need to show the terms of the sale or the withdrawal (the paperwork showing that it is money that belongs to you and not borrowed) and the receipt of the funds through the deposit in your account. You cannot borrow against the policy as you may not use borrowed funds as a source of down payment.

2024 Purchase Changes & Improvements

Assistance with Borrower’s Fees: Now, parties involved in the home buying process (like sellers, agents, and builders) can contribute up to 6% of the home’s cost to help with various fees.
Uses of the 6% Contribution: This amount can cover expenses such as origination fees, closing costs (including credit reports and appraisals), prepaid items, discount points, interest rate reductions, and the initial mortgage insurance premium. However, it cannot be used for counseling fees.
Additional Funding Options: In addition to the HECM loan, you can use other sources, such as premium pricing, gifts, disaster relief grants, and employer assistance, to fund your share of the purchase.
Premium Pricing Credits: Deals from mortgage companies or third-party originators are exempt from the 6% limit, provided they are not the seller, agent, builder, or developer.
Seller-Related Fees: Usual seller fees, such as real estate commissions and home warranty costs, are permitted and do not count towards the 6% limit.
PACE Liens: Clearing a Property Assessed Clean Energy (PACE) lien by the seller is not considered an interested party contribution under this program.

These updates make buying a home easier under the HECM for Purchase program by allowing more financial support from various sources.

For More Information:

Check the FHA Single Family Housing Policy Handbook at Hud.gov.
Refer to the Federal Register for detailed updates.

ARLO recommends these helpful resources:

Read about our own HECM Purchase client success story in Kiplinger’s Retirement Report

HECM Purchase YouTube Series

What is a Reverse Mortgage for Home Purchase?

HECM Purchase Vs. Traditional HECM

Real life examples of HECM for purchase (PART 1)

Real life examples of HECM for purchase (PART 2)

HECM Purchase Eligibility & Qualifications

HECM Purchase - How is the Down Payment Calculated?

HECM Purchase - What Are the Allowable Sources for Down Payment?

Why a HECM Purchase Single Transaction Saves on Closing Costs

HECM Purchase - What Property Types Are Eligible?

HECM Purchase Eligibility & Qualifications

HECM Purchase Pre-Approval & Application Process

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12 Comments on this Article

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

2024 Reverse Mortgage Purchase Guide: Rates, Limits & Down Payment

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