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Reverse mortgage question

What fees can the seller pay in a HECM for Purchase transaction?

Since HUD's Mortgagee Letter 2024-06, for case numbers assigned on or after April 29, 2024, sellers and other interested parties can contribute up to 6 percent of the sales price toward a HECM for Purchase buyer's costs. That money can go toward origination fees, other closing costs, prepaid items, and the upfront mortgage insurance premium. It can't be used for discount points or rate buydowns, and the lender and loan originator can't contribute. Costs a seller normally pays by law or local custom don't count toward the 6 percent.

Short answer: more than you might think, as of 2024. For years, sellers could pay almost nothing toward a HECM for Purchase buyer's costs. HUD changed that with Mortgagee Letter 2024-06.

If you're reading an older article, including my own old answer to this question, that says the seller is limited to taxes, HOA prorations, and customary costs, it's out of date.

What the seller can pay now

For HECM for Purchase loans with case numbers assigned on or after April 29, 2024:

Who can contribute: sellers, real estate agents, builders, and developers.
How much: up to 6 percent of the sales price.
What it can pay for: the origination fee, other closing costs, prepaid items like taxes and insurance, and the upfront FHA mortgage insurance premium.

What the seller can't pay

Discount points or rate buydowns. HUD proposed allowing these in 2023 but decided not to make that change.
The buyer's down payment. On a HECM for Purchase, the buyer's required investment has to come from acceptable sources, like their own money or the sale of their current home. Seller credits can help with closing costs, prepaid items, and the upfront mortgage insurance, within HUD's 6 percent limit, but they can't cover the rest of your required investment.

And the lender and loan originator can't make interested party contributions at all.

What doesn't count toward the 6 percent

Costs a seller normally pays by law or local custom, like their own real estate commission and transfer taxes where the seller customarily pays them, don't count against the 6 percent. Neither does a seller-paid home warranty.

How to write it into the contract

The total contribution has to be spelled out in the purchase contract or another binding document, and the appraiser gets a copy. If you're the buyer's agent, write it clearly, with dollar amounts or a percentage, and send it to your loan officer early. See The Purchase Reverse Mortgage Guide for Real Estate Professionals.

The same Mortgagee Letter also changed a few other things for buyers:

A buyer who is the licensed real estate agent on the deal can put their own commission toward their down payment.
A family member who is entitled to a commission on the sale can give it to the buyer as a gift.

Why it matters

A HECM for Purchase lets a buyer 62 or older buy a home with a down payment and no required monthly mortgage payments afterward. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms.

Upfront costs on a HECM can be significant, so a seller credit of up to 6 percent can make a real difference in how much cash the buyer needs at closing. See Reverse Mortgage Costs.

Working on a purchase right now? Call us at 530-888-6000 and we'll look at the contract with you. We can generally close a HECM for Purchase in 30 days or less, but we always follow the contract.

Sources

HUD Mortgagee Letter 2024-06: hud.gov
Federal Register notice, October 24, 2023 (HUD's proposal): federalregister.gov

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.

HECM count at the top of this page: HUD data through September 2026 (source, opens in a new tab).