Loan option
HECM for Purchase
Using an FHA-insured reverse mortgage to buy a home rather than to borrow against one you already own. You combine the loan proceeds with your own funds in a single closing and take on no monthly principal and interest payment.
How it works
How HECM for Purchase works
It is one transaction, not two. Rather than buying a home with cash or a traditional mortgage and then taking a reverse mortgage against it later, the reverse mortgage is part of the purchase itself — which avoids paying two sets of closing costs.
You bring a substantial down payment from your own funds, commonly the proceeds of the home you are selling. The reverse mortgage covers the rest. How much it covers depends on the same principal limit calculation as any HECM: the age of the youngest borrower, the expected rate, and the lesser of the price or the FHA lending limit.
The funds you contribute must come from acceptable sources and be documented, as with any mortgage. Certain sources are not permitted.
After closing, it behaves like any other HECM. No monthly principal and interest payment, a balance that grows, and the same obligations: taxes, insurance, association dues, maintenance and occupying the home as your principal residence.
What to weigh up
- The property has to meet FHA standards, which can rule out some condominium projects and older housing stock.
- Independent HUD-approved counseling is required before the application is completed, as with any HECM.
- Model it against simply buying with cash. Keeping more of your proceeds is worth something; so is not having a growing balance against the new house. There is no general answer, only your numbers.
- In Florida, factor insurance and any association dues into the comparison properly. They continue regardless of how the purchase is financed, and they are obligations under the loan.
Set by the lender, not by us
These vary between lenders and change over time. Nothing on this page is a quote, an approval, or a commitment to lend.
- Which property types and condominium projects are acceptable
- Acceptable sources for the funds you contribute
- Financial assessment requirements and any set-aside for property charges
- Timelines, which can be longer than a conventional purchase
Nothing on this page is a rate quote, an approval, or a commitment to lend. Figures and requirements change, and they depend on your file.
Terms used on this page
- HECM for Purchase
- Using an FHA-insured reverse mortgage to buy a home rather than to borrow against one you already own, combining the loan proceeds with your own funds in a single transaction.Often used to move to a home that suits later life without taking on a monthly principal and interest payment. The same obligations apply — taxes, insurance, maintenance and occupancy.
- HECM (Home Equity Conversion Mortgage)
- The FHA-insured reverse mortgage, and the most common type in the United States. It lets eligible homeowners aged 62 or older convert part of their home equity into loan proceeds without a monthly principal and interest payment.You keep title to the home and you still have obligations: property taxes, homeowners insurance and association dues must stay current, the property must be maintained, and it must remain your principal residence. Failing those can make the loan due and payable.
- Reverse mortgage
- A loan that lets an eligible older homeowner convert part of their home equity into proceeds without a monthly principal and interest payment. The balance grows over time and is repaid when the loan becomes due.You keep title to the home — it is not a sale to the bank. But you remain responsible for property taxes, homeowners insurance, association dues and maintenance, and the home must remain your principal residence. Those obligations are where most reverse mortgage trouble actually starts.
- Cash to close
- The total funds you need at closing: down payment, closing costs, prepaid items such as taxes and insurance, and any escrow set-up.It is usually larger than the down payment alone, and it is the figure worth planning around.
Questions about this program
- How much do I have to put down?
- A substantial amount, and the exact figure is calculated for your case from the age of the youngest borrower, the expected interest rate and the lesser of the purchase price or the FHA lending limit. Older buyers contribute less. It cannot be quoted as a percentage in advance.
- Can I use it for any home?
- The property must be your principal residence and must meet FHA property standards. That rules out investment purchases and second homes, and it can rule out particular condominium projects, which is worth checking before you make an offer.
Official sources
Program rules are set by these organizations and are updated periodically. Where this page and an official source disagree, the official source is correct.
- Reverse mortgages: what you should know (opens in a new tab) — Consumer Financial Protection Bureau
- Home Equity Conversion Mortgages for seniors (opens in a new tab) — HUD
- HECM counseling requirement and counselor search (opens in a new tab) — HUD
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Talk it through before you start shopping
Bring your situation, not your paperwork. A first conversation is about which programs actually fit and what the numbers look like — no documents, no credit pull, no commitment.