A HECM for Purchase lets buyers 62 and older buy their next primary residence with a reverse mortgage and a down payment, all in one closing. There are no required monthly mortgage payments afterward, but the buyer must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. For agents, it means older buyers can often buy more home than cash alone would allow, without taking on a new monthly payment. It also comes with FHA contract rules that can sink a deal if nobody knows them, so this guide walks through the program the way you'll actually see it in a transaction.
Older homeowners are buying homes. They're downsizing, moving closer to the grandkids, trading a two-story for a single-story, or finally leaving the house with the big yard.
What most of them don't know, and frankly what most agents don't know either, is that there's a loan built for exactly that move. It's called the HECM for Purchase. This guide covers it from your side of the table: who it fits, how the money works, what the contract has to say, and what tends to blow up a closing.
A HECM for Purchase is the FHA-insured reverse mortgage, used to buy instead of refinance. Picture the buyer's money in two buckets:
There's no second closing and no "buy now, refinance later." One loan, one closing.
After closing, there are no required monthly mortgage payments. The buyer must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. The buyer can make voluntary payments if they want, and the loan is generally repaid when they sell, move out for good, or pass away, or if they don't meet the loan terms.
For the consumer version of this, send your clients to HECM for Purchase.
In my experience, the best HECM for Purchase buyers are:
And a few it usually doesn't fit:
The down payment isn't a fixed percent like a regular mortgage. It depends on three things:
The single best thing you can do before you write an offer is get the buyer's numbers run. It takes a loan officer a few minutes, and it tells you exactly what price range works. Your buyer can also start with the reverse mortgage calculator.
Under HUD's current rules, the buyer's share can come from:
It can't come from sweat equity, trade equity, rent credit, or a lender's premium pricing credit.
This is where a lot of agents get tripped up, because the rules changed.
For years, the seller couldn't pay any of the buyer's costs on a HECM for Purchase. That changed with Mortgagee Letter 2024-06, for case numbers assigned on or after April 29, 2024.
Here's how it works now:
If you're reading an older article, including some of mine, that says seller concessions aren't allowed, or that points and buydowns are, it's out of date.
The HECM for Purchase is an FHA loan, and FHA has opinions about the contract. Get these right up front:
HECM appraisals get an extra look. FHA reviews HECM appraisals and can require a second appraisal if the first one looks high. When there are two, the lower value is used. If a second appraisal is needed, ZYNG often covers the cost. See Is there a situation where I would need 2 appraisals?
What that means for you: price the offer on value you can defend, and build a little time into the contract for the appraisal to clear.
Before applying, the buyer has to complete counseling with an independent, HUD-approved counselor. A non-borrowing spouse has to attend too. In California, a lender can't take a complete reverse mortgage application until 7 days after counseling. See Why do I need to wait 7 days after counseling?
My advice: have the buyer do counseling before they find the house. It's usually about an hour by phone, and it takes a week or more off the transaction. See Reverse Mortgage Counseling.
From accepted offer to closing, we can generally close in 30 days or less, but we always follow the contract. Write the contingency dates with that in mind, and give us a call before you set them if the deal is tight.
These are the ones I see most often:
Yes, if the condo project or unit is FHA-approved. Check approval before you write the offer.
Yes, since April 2024: up to 6 percent of the sales price toward origination, other closing costs, prepaids, and the upfront mortgage insurance. Not for discount points or buydowns.
Yes. There's no requirement to be retired. The lender reviews income and credit in the financial assessment. See Reverse Mortgage Financial Assessment.
The older spouse can be the borrower, and the younger spouse can be a non-borrowing spouse. The younger age lowers the loan amount, so the down payment goes up.
Generally yes, as long as the new home becomes their primary residence and they can still afford both. See Can I retain my existing home?
No. There are no required monthly mortgage payments. They must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms.
It depends on the lender. Ask your loan officer up front.
This guide is a starting point, not a substitute for running a real scenario. If you have a buyer in mind, or you'd like me to walk your office through the HECM for Purchase, call us at 530-888-6000 or book a call.
For more on working with us, see Partner With Us.
ZYNG Mortgage, Inc., NMLS #76801. A reverse mortgage has no required monthly mortgage payments and uses your home's equity. Fees, mortgage insurance and other costs can be added to the loan balance, and the balance grows over time as interest is added, so your equity typically decreases. When the loan becomes due, the home may need to be sold, or the loan repaid from other funds. Interest is not tax-deductible until it is paid, in part or in full. You keep title to your home and must keep paying property taxes, homeowners insurance and upkeep, and meet the other loan terms; not doing so can make the loan due and could lead to foreclosure.
This material is not from HUD or FHA and was not approved by HUD or a government agency.
