HECM for Purchase: Buying Your Next Home With a Reverse Mortgage Loan

 

Thinking about downsizing, moving closer to the grandkids, or finally trading Minnesota winters for Florida sunshine? If you're 62 or older, a HECM for Purchase may let you buy your next home with a reverse mortgage loan, so you can avoid a monthly mortgage payment on the new home while not needing to come up with 100% of the new property purchase price in cash. You still pay property taxes, homeowners insurance, and any HOA dues, and you live in and keep up maintenance on the home.

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This page explains how a HECM for Purchase works, who may qualify, and how it compares to paying cash or taking a traditional mortgage. It's educational; your own numbers depend on your age, the home price, current interest rates, and FHA limits.

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What is a HECM for Purchase?

A HECM (Home Equity Conversion Mortgage) is the reverse mortgage loan insured by the Federal Housing Administration (FHA), allowing a borrower to buy a new principal residence and take out the HECM in the same transaction, instead of buying first and refinancing later.

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In plain terms: you put down a sizable portion of the price from your own funds (often from selling your current home), and the HECM covers the rest.

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How it works

• One closing. The purchase and the reverse mortgage loan close together.

• Down payment from you. You bring the difference between the price (plus closing costs) and what the HECM provides.

• No monthly mortgage payment required. You may choose to pay, but you aren't required to as long as you meet the loan terms.

• Ongoing obligations. You must live in the home as your principal residence, pay property taxes, insurance, and HOA dues, and maintain the home. Not meeting these can cause the loan to become due.

• The balance grows over time. Interest and mortgage insurance are added to the loan balance.

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Who may qualify​

• Age: The youngest borrower is at least 62. (Rules for an eligible non-borrowing spouse may apply.)

• Principal residence: You must move in as your primary home within 60 days after closing. Second homes and investment properties don't qualify.

• Eligible property: Typically single-family homes, 2–4 unit homes where you live in one unit, FHA-approved condominiums, and manufactured homes that meet FHA standards. New construction generally needs a certificate of occupancy before closing.

• Your funds: The down payment usually comes from your savings or the sale of your current home. Gifts from family and limited seller-paid costs may also be allowed. Sweat equity, trade equity, and rent credits can't be used. We'll confirm what's acceptable for your situation.

• Counseling: You'll meet with an independent, HUD-approved HECM counselor before applying.

• Financial assessment: The lender reviews income, credit, and expenses to make sure you can keep up with taxes, insurance, and upkeep. Some borrowers may need a set-aside for those costs.

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How much is the down payment?

There's no single answer. The HECM amount depends mainly on the age of the youngest borrower (or eligible non-borrowing spouse), current interest rates, and the lesser of the home's price, appraised value, or the FHA lending limit.

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For example, if a 70-year-old buyer purchases a $400,000 home and, at that day's rates, the HECM could provide roughly half of the price, the buyer would bring the other half plus closing costs from their own funds. Older borrowers typically get a larger portion; younger borrowers a smaller one. This is an example scenario only and actual figures change with rates and are not guaranteed.

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Run your own example in our reverse mortgage loan calculator, then ask our team for a free, no-obligation quote.

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HECM for Purchase vs. paying cash vs. a traditional mortgage