Welcome to our guide on Purchase Reverse Mortgages! In this article, we explain how you can buy a new home with a special kind of reverse mortgage, making it easier to transition as you age. Whether you’re downsizing, moving to a more accessible home, or relocating closer to family, this guide is for you.

We’ll cover the essentials — from the benefits of a Reverse Mortgage Purchase to how the Home Equity Conversion Mortgage (HECM) for Purchase program works — to help you decide if this option is right for you.

Reverse Mortgage Purchase Basics

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

Main requirements:

• 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:

• 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 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.

Eligible Properties

• Single-family homes
• Planned Unit Developments (PUDs)
• 2–4-unit dwellings
• HUD-approved condominiums

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.

Ineligible Properties

• Homes under construction and not yet habitable
• 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 payments after the closing.

Many borrowers use equity from selling their current home. If that’s not enough, savings or other acceptable sources can fill the gap. If sale proceeds don’t cover the down payment, the borrower provides the difference in cash.

FHA allows certain sources — such as family gifts from parties with no interest in the transaction — to help with the down payment. If you plan to use gift funds, discuss documentation requirements with your lender.

The down payment requirement depends on:

• Age of the youngest borrower
• Current interest rates
• Home price or the HECM lending limit of $1,209,750

Typically, the down payment for a HECM for Purchase is between 45–70% of the purchase price. The table below shows examples by home price and age.

2025 HECM Purchase: Down Payment Estimates by Age

Sourcing Your Down Payment

Common sources:

• Cash on hand (savings, retirement funds, etc.)
• Proceeds from selling your home
• Gifts from family

The most common sources are sale proceeds and savings. The Federal Housing Administration accepts various funding sources.

Acceptable sources include:

• Earnest money deposits
• Withdrawals from checking, savings, or retirement funds
• Gifts from family members, employers, charities, qualifying government organizations, or close friends with a documented interest in the borrower

All funds must be verified. Gifts from anyone involved in the transaction are not acceptable. Less common sources (e.g., collateralized loans, savings bonds, employer assistance) may also be allowed with documentation.

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: an 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 move during retirement without monthly mortgage payments. However, like all loans, there are trade-offs.

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:

• FHA Handbook: HUD.gov
• Federal Register update: federalregister.gov

ARLO recommends these helpful resources:

• Client success story in Kiplinger’s Retirement Report