Reverse mortgage guide
HECM for Purchase: Buy Your Next Home Without a Monthly Mortgage Payment
Sell the big house, buy the one that fits, and skip the mortgage payment. That's the idea. Here's how it works and where the rules bite.
HECM for Purchase lets a buyer who's 62 or older buy a new primary home with a reverse mortgage covering part of the price, and no required monthly mortgage payment afterward. You pay the rest as a down payment, which usually comes from selling the house you're leaving. It's one transaction instead of two: no buying with cash and then taking out a reverse mortgage later, and no new 30-year payment at 70.
It's the same FHA-insured loan I cover on my reverse mortgage in Orange County page, used to buy instead of to stay. This guide is about the move.
The North OC right-sizing move
Here's the conversation I have most often. A couple in their late 60s or early 70s has lived in the same two-story in Yorba Linda, Placentia or Fullerton for 30 years. The kids are gone. The stairs are becoming a problem, and the yard is a weekend job nobody wants anymore. They'd like a single-story home, or a place in a 55+ community, maybe closer to the grandkids.
The obvious plan is to sell and pay cash for the next one. It works. It also parks most of their net worth in the new house and leaves less in the bank for the next 20 years. The other obvious plan, a regular mortgage, brings back a monthly payment they spent decades getting rid of.
HECM for Purchase is the third option. The reverse mortgage pays part of the price. They pay the rest. More of the sale proceeds stay liquid, and there's no required mortgage payment.
An illustration, with round numbers
Illustration only. Your numbers will be different.
- A couple, youngest spouse age 72, sells a two-story North OC home for $1,300,000. After paying off a small mortgage and selling costs, they net about $1,150,000.
- They buy a single-story home for $900,000.
- Paying cash would leave them about $250,000.
- With HECM for Purchase, the reverse mortgage covers part of the $900,000 and they cover the rest. At that age the down payment often lands around half the price, sometimes more, depending on age and the rate environment. Using half as a round number, that's about $450,000 down, leaving roughly $700,000 in the bank instead of $250,000.
The tradeoff: the reverse mortgage balance grows over time, so they'll have less equity in the new home later. They're trading future home equity for cash on hand today and no payment. For some people that's the right trade. For others, paying cash is better. I show both side by side.
How the down payment is set
There's no fixed down payment percentage. HUD's formula looks at three things:
- Age of the youngest borrower (or eligible non-borrowing spouse). Older means a smaller down payment.
- The purchase price or appraised value, whichever is lower, capped at the 2026 HECM limit of $1,249,125.
- The expected interest rate at the time you lock. Higher rates mean the loan covers less, so you put more down.
That cap matters in Orange County. On a $1,600,000 purchase, the HECM calculation stops at $1,249,125, and you cover everything above it plus the normal down payment on the rest. For higher-priced homes, some private lenders offer a proprietary reverse mortgage for purchase that uses more of the price. I compare both.
Closing costs, including the FHA upfront mortgage insurance premium, can be financed into the loan or paid in cash. The breakdown of those costs is in reverse mortgage pros and cons.
The rules that trip people up
HECM for Purchase has a few rules that don't exist on a regular purchase loan. Your agent needs to know them before you write an offer.
- You must move in within 60 days of closing. The home must be your primary residence. No second homes, no rentals.
- The down payment can't be borrowed. It has to come from your own funds: the sale of your old home, savings or investments. No credit cards, no bridge loan against the new home, no seller carry-back.
- Seller concessions are restricted. Sellers generally can't pay your closing costs or give credits beyond what's customary for a seller to pay in the area. If your agent is used to negotiating a big seller credit, this deal is structured differently.
- New construction must be finished. The builder needs a certificate of occupancy, or the local equivalent, before closing. You can't close on a home that's still being framed.
- The property has to be eligible. Single-family homes, 2 to 4 units where you live in one, FHA-approved condos and certain manufactured homes. In a 55+ condo community, FHA approval of the project is the first thing I check. Full list in reverse mortgage requirements.
- Counseling comes first. Same as any HECM, you meet with a HUD-approved counselor before the lender takes the application.
- Get the appraisal right. If the home appraises below the contract price, the loan is based on the lower number and your cash to close goes up.
What still stays with you
No monthly mortgage payment doesn't mean no bills. You still pay property taxes, homeowners insurance, HOA dues if there are any, and upkeep. The lender runs a financial assessment to make sure those are covered, and it can set aside part of the proceeds to pay them if needed. Mello-Roos and HOA fees in some newer OC communities can be substantial, so I factor those into the plan before you pick the house.
The loan comes due when the last borrower moves out for good or passes away. Your heirs can sell the home and keep what's left, pay off the loan and keep it, or hand it back. It's non-recourse, so nobody ever owes more than the home is worth.
Timing the sale and the purchase
The cleanest version is to sell first, then buy. The sale proceeds are sitting in escrow or in your account, the down payment is documented, and there's no contingency to explain to a seller.
If you need to buy first, it's doable, but the down payment still has to be your own money at closing. That can mean using savings or investments and replacing them after your old home sells. We'd map that out before you start touring.
Why this is a broker conversation
I spent seventeen years at Chase, including three running a home lending team in Southern California. A lot of banks don't offer HECM for Purchase at all, and plenty of real estate agents have never closed one. I compare reverse lenders on what matters for a purchase: how much the loan covers at your age, the upfront costs and how well they handle a purchase timeline. I'll also talk to your agent early so the offer is written correctly.
If paying cash or a regular mortgage is the better answer for you, I'll show you that too.
Questions people ask
Can you use a reverse mortgage to buy a home?
Yes. The FHA program is called HECM for Purchase. If you're 62 or older, a reverse mortgage covers part of the price of your new primary residence and you pay the rest as a down payment, usually from the sale of your current home. There's no required monthly mortgage payment afterward, though you still pay taxes, insurance and upkeep.
How much do you have to put down on a HECM for Purchase?
It depends on the age of the youngest borrower, the purchase price and the interest rate environment at the time, all run through HUD's formula. Older buyers put down less. The price used in the formula is capped at the 2026 HECM limit of $1,249,125, so homes above it need a larger down payment. I run the exact figure for your age and price before you write an offer.
Can I borrow the down payment?
No. The down payment has to come from your own money: proceeds from selling your current home, savings or investments. It can't come from a credit card, a bridge loan against the new home or seller financing.
How long do I have to move in?
You have to occupy the new home as your primary residence within 60 days of closing, and keep living there. It can't be a second home or a rental.
Can I buy a new-construction home with HECM for Purchase?
Yes, as long as the home is complete. The builder has to have a certificate of occupancy, or its local equivalent, before the loan can close.
Let’s look at your numbers
Fifteen minutes. Your real numbers. No pressure.
Call or text my cell, or book a time. You’ll get a written comparison with real terms and an APR on every option, and if your current deal already wins, I’ll tell you.