HECM for purchase

Buyers aged 62 or older can purchase a home with one reverse mortgage and cash down payment through a HECM for purchase. The HECM covers the balance of the price. No monthly loan payment is due, just as with any HECM. HUD's latest twelve months of data show 1,354 HECMs used this way.

Other names include reverse mortgage for purchase and H4P reverse mortgage. Homeowners most often use it when selling a larger home and buying a smaller or more suitable one.

How a HECM for purchase works

During closing, you buy the new home and obtain the HECM at the same time. You do not use a regular mortgage between buying the home and getting the HECM.

1. As with any HECM, you attend HUD-approved counseling.
2. After choosing a home, you sign its purchase contract.
3. The lender calculates the HECM using your age and whichever amount is lower, the price or appraised value.
4. You provide the down payment at closing. The HECM covers the remaining amount for the seller.
5. You move in without owing any monthly loan payment. Taxes, insurance and upkeep remain your responsibility.

According to the CFPB, a HECM for purchase borrower has to be at least 62 and make the new home their main residence.

How much down payment you need

Subtract what the HECM can pay after its costs from the purchase price to find the down payment. As your age increases, the HECM covers more and you contribute less.

The calculator uses its default rate for a home priced at $450,000:

Other closing costs are estimated at $3,500 by the calculator for these figures. Because each purchase closing has separate title, recording and inspection costs, ask the lender for a written estimate. Enter a different price in the calculator as the home value, with nothing owed.

• Amount paid by the HECM after costs
• Your down payment

Sources for your down payment

You must provide the down payment with your own money. It normally comes from:

• money from selling the home you live in now
• money in money in savings or investments
• family money documented as a gift

Borrowing this money is not allowed, including with a credit card or a loan using the new home as collateral. The lender will ask to see evidence showing where the money came from.

The rules for a reverse mortgage to buy a house

• Each borrower must be at least 62.
• Soon after closing, the new home must be your main residence.
• The property has to be a type FHA accepts: an eligible manufactured home, an approved condo, a one-family house, or a small multi-unit building if you live in one of the units.
• If the home is newly built, it has to be finished and ready for you to live in.
• The price or value counted cannot exceed the 2026 HECM limit of $1,249,125, so a more expensive home requires a larger down payment.
• Any HECM has the same upfront costs: 2% mortgage insurance, a capped origination fee and closing costs.

All eligibility rules appear in the requirements guide.

HECM for purchase vs paying cash or a regular mortgage

If you pay all cash, you keep all your equity but have the most money tied up. You need income to make monthly payments on a regular mortgage. Compared with paying in full, a HECM for purchase leaves more cash in your pocket and requires no monthly payment, but the balance grows.

Who it suits

• Buyers who want to downsize or live closer to family without making mortgage payments.
• Buyers who want a home that works for them as they age, such as one without stairs.
• Buyers who prefer keeping some sale money in the bank instead of putting all of it into the new home.

This choice suits you less if another move may come within a few years. You pay the upfront costs in full even if you stay only briefly.

Questions people ask

1. What is a HECM for purchase?

   This FHA-insured reverse mortgage purchases your new main home during the same closing. You provide a down payment, and the HECM covers the rest.

2. Can you use a reverse mortgage to purchase a home?

   Yes. You can use a HECM for purchase when every borrower is 62 or older. The home must also serve as your main residence.

3. How much is the HECM for Purchase down payment?

   Subtract the amount covered by the HECM after costs from the purchase price. At the default rate, a 70-year-old buyer would need about $294,800 down for a $450,000 home. Older buyers need less.

4. What does an H4P mortgage mean?

   Lenders use H4P as shorthand for HECM for purchase. This is the same FHA program, and its rules are unchanged.

5. What are the drawbacks of using an HECM loan to purchase a home?

   You pay a large sum toward the home upfront, plus HECM costs. As the loan balance rises, the home equity created by your down payment declines over time.