Reverse Mortgage for Purchase

(HECM for Purchase)

Buy a Home with a Reverse Mortgage? Here’s How It Works

A Reverse Mortgage for Purchase, also known as a Home Equity Conversion Mortgage (HECM) for Purchase, allows homeowners aged 62 and older to buy a new home using proceeds from a reverse mortgage. The key advantage? You only pay one set of closing costs instead of financing a home purchase first and then getting a reverse mortgage later, which would result in double the closing costs.

This program was introduced under the Housing and Economic Recovery Act of 2008 and became available on January 1, 2009. To qualify, borrowers must meet all standard HECM requirements, along with a few additional rules specific to purchasing a home with a reverse mortgage.

HECM for Purchase: Key Requirements

Purchase an existing 1- to 4-unit property
The home must be your primary residence
No additional liens are allowed after the loan closes (Lender holds 1st position, HUD holds a silent 2nd)
You must provide a monetary investment at closing from an approved source (see below)
You must move into the home within 60 days of closing
If purchasing a newly built home, it must have a certificate of occupancy before the loan can be insured by FHA

How Does a HECM for Purchase Differ from a Traditional HECM?

While both options allow seniors to tap into home equity without monthly mortgage payments, there are key differences when using a reverse mortgage to buy a home:

  • Different property eligibility rules

  • Specific cash investment requirements at closing

  • A real estate agent is often involved in the process

  • A home inspection is strongly recommended (but not required)

  • Additional closing costs may apply

Eligible & Ineligible Properties

✔️ Eligible Properties

  • The same types of homes that qualify for standard FHA-insured reverse mortgages

❌ Ineligible Properties

  • Co-op units

  • Certain manufactured homes

  • Bed & breakfast properties or boarding houses

Choosing a Home & Home Inspections

While not required, HUD strongly encourages seniors to get a professional home inspection before finalizing a purchase. A home inspection can help:

 Assess the home’s condition – including its structure, construction, and mechanical systems
 Identify needed repairs – some may need to be addressed before closing
 Estimate the lifespan of major home components like the roof, HVAC, and plumbing
 Provide peace of mind – buyers should attend the inspection and ask questions

Required Repairs

  • Health, safety, or structural integrity issues must be fixed before closing

  • Repairs must be completed by the seller and included in the purchase agreement

  • Buyers cannot pay for repairs before they own the home

Making an Offer on a Home

Your purchase offer should include a home inspection contingency
You may want an attorney to review your offer (this adds costs but provides legal protection)
You can cancel the transaction before closing, but it may impact your earnest money deposit

Closing Costs for a HECM Purchase

In addition to standard HECM closing costs, you may also need to pay:
Recordation fees
 Transfer taxes (varies by state)

 Get a no-obligation Reverse Mortgage evaluation and quote today!

Common Questions About HECM for Purchase

What Is the Monetary Investment Requirement?

At closing, borrowers must contribute funds to cover:

  • The difference between the HECM principal limit and the home’s purchase price

  • Any HECM loan-related fees not financed through the reverse mortgage

These funds can come from:
- The sale of a previous home
- Savings or retirement accounts
- Contributions (up to 6% of the sales price) from an interested party (seller, builder, real estate agent, etc.)

Lenders must verify all sources of funds before closing. If an account shows a large deposit or was recently opened, borrowers must provide documentation explaining the source of funds.

What Funding Sources Are NOT Allowed?

❌ Credit card advances
❌ Loans (secured or unsecured) from another asset (car, home equity, etc.)
❌ Bridge loans (gap financing)
❌ Seller financing

All funds must be available at closing—no exceptions.

The Role of a Real Estate Agent

Seniors considering a HECM for Purchase should work with an experienced real estate agent who understands the process.

Important considerations for a home purchase contract:
Include contingencies for home sale, inspections, and financing
✔️ Work with an attorney (if desired) to review the contract
✔️ Understand that canceling the transaction before closing may impact your earnest money deposit

Other Important Considerations

No Three-Day Right of Rescission – Unlike a traditional HECM, HECM for Purchase transactions are final on closing day. There is no three-day window to cancel.

Existing Reverse Mortgage Borrowers – If you already have a reverse mortgage and want to use a HECM for Purchase, you will not receive a reduction in the upfront mortgage insurance premium (MIP).

Counseling Requirement – Borrowers must complete HUD-approved reverse mortgage counseling before applying for a HECM for Purchase loan.

 Property Must Meet FHA Standards – The home must:

  • Be the borrower’s primary residence

  • Have construction completed and a certificate of occupancy (if newly built)

  • Have no outstanding construction loans or liens at closing

Property Flipping Restrictions

To prevent fraudulent property flipping, FHA requires that:

- Only current owners of record can sell properties financed with FHA loans
- Homes cannot be resold within 90 days of a previous sale
- If a home is resold within 91-180 days, and the new sales price is over 100% of the previous sales price, the lender must provide additional documentation proving the home’s increased value

Is a HECM for Purchase Right for You?

A HECM for Purchase lets you buy a home that better suits your needs—without monthly mortgage payments.Whether you want to downsize, move closer to family, or enjoy a more accessible home, a reverse mortgage can help you achieve your retirement goals while keeping financial flexibility.

 Contact us today for a personalized reverse mortgage consultation!

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