Can I Buy a House With a Reverse Mortgage? Costs and Steps

Yes, buying a house with a reverse mortgage is possible through the FHA’s Home Equity Conversion Mortgage for Purchase program, which is open to buyers aged 62 and older. The program lets you combine a large cash down payment with a reverse mortgage to acquire a new primary residence in a single closing, with no monthly mortgage payments afterward. In exchange, you bring a sizable chunk of the price in cash (typically 40 to 65 percent, depending on your age and rates), and interest and mortgage insurance accrue against your equity until the last borrower sells, moves out permanently, or dies.¹

Who Can Use the Program

The youngest borrower on the loan must be at least 62 at closing.² The house has to be your primary residence, and you must move in within 60 days of closing. Vacation homes and investment properties are out.

Eligible properties include single-family homes, two-to-four-unit buildings where you occupy one unit, and HUD-approved condominiums.³ Manufactured homes can qualify if they were built after June 1976 and sit on a permanent foundation.

Delinquent federal debt is disqualifying. Unpaid federal income taxes or defaulted federal student loans will stop the deal, though you can use the reverse mortgage proceeds themselves to clear that debt before closing.² The home also has to pass an FHA appraisal that covers structural soundness, roofing, and health hazards like lead paint. Flagged repairs generally have to be finished before closing.

How Much Cash You Need to Bring

The required cash is often called the “gap.” It equals the purchase price plus closing costs, minus the loan proceeds. Because the loan only covers a fraction of the home’s value, the gap is substantial.

At recent interest rates, expect to bring roughly 50 to 65 percent of the purchase price if you’re in your early-to-mid 60s, or around 40 to 50 percent if you’re in your 80s. The older the youngest borrower, the more FHA will lend and the less cash you need.

The down payment must come from your own liquid assets: savings, investment accounts, or proceeds from selling a previous home.¹ Federal rules have historically prohibited credit card advances or bridge loans for this purpose. In 2023, FHA announced it would update the program to allow interested party contributions of up to six percent of the sales price toward origination fees, closing costs, prepaid items, and discount points.⁴ Seller-customary costs like real estate commissions and home warranties don’t count against that cap.

The 2026 Loan Limit and Why Your Proceeds Are Smaller Than the Price

The national HECM maximum claim amount for 2026 is $1,249,125, and that figure applies everywhere, including Alaska, Hawaii, Guam, and the U.S. Virgin Islands.⁵ You can buy a more expensive home, but the loan calculation stops at that ceiling. Every dollar above comes out of your pocket.

Your actual proceeds are well below the maximum claim amount. FHA applies a principal limit factor based on the youngest borrower’s age and current interest rates. At a 6 percent rate, a 65-year-old can access roughly 38 percent of the home’s value; an 80-year-old can access around 52 percent. The rest is your responsibility.

Costs and Fees

A HECM for Purchase layers several costs on top of the down payment. Most can be paid out of loan proceeds rather than brought as extra cash, but financing them reduces your starting equity.

Origination fee: the greater of $2,500 or 2 percent of the first $200,000 of home value, plus 1 percent of any value above $200,000, capped at $6,000.⁶
Initial mortgage insurance premium: 2 percent of the maximum claim amount or the appraised value, whichever is less. On a $400,000 home, that’s $8,000.
Annual mortgage insurance premium: 0.5 percent of the outstanding balance, accruing monthly and added to the balance.
Counseling fee: HUD-approved agencies typically charge $145 to $200, with some waivers for financial hardship.
Third-party closing costs: appraisal, title search, title insurance, recording fees, and similar charges, comparable to those in a traditional home purchase.⁶

The initial and annual MIP charges fund FHA’s insurance of the loan. That insurance also protects you: if the balance eventually exceeds what the home is worth, you still owe nothing beyond the home’s value.

Fixed Rate or Adjustable Rate

For a purchase, most borrowers take the adjustable-rate HECM. The fixed-rate version requires drawing the entire loan amount as a single lump sum at closing. That works mechanically for a purchase, but any leftover proceeds are gone as a future resource, and interest starts accruing on the full balance right away.

An adjustable-rate HECM lets you leave unused proceeds in a line of credit that grows at the same rate charged on the borrowed balance. That growing credit line is a cushion you can tap later for repairs, medical bills, or anything else. The rate can move, but HECM adjustable rates carry annual and lifetime caps.

The Buying Process

Counseling and Lender Selection

Before anything else, complete a counseling session with a HUD-approved agency. The counselor walks through how the loan works, how your equity changes over time, and the obligations you’re taking on. You receive a certificate afterward, and no lender can process your application without it.

With the certificate in hand, you apply through an FHA-approved lender that handles reverse mortgages. Experience matters. A lender who routinely closes HECM for Purchase transactions will coordinate better with real estate agents and title companies that may be unfamiliar with the process.

Financial Assessment

The lender runs a financial assessment to confirm you can cover ongoing property charges. The review looks at credit history, your track record on property taxes and insurance, and residual income after expenses.⁷ If the assessment raises concerns, the lender may require a Life Expectancy Set-Aside: a chunk of loan proceeds held in reserve for property tax and insurance payments. That set-aside shrinks the money available for the purchase, which means a larger cash contribution from you.

Appraisal and Closing

The lender orders an FHA appraisal, which is more thorough than a standard appraisal. The appraiser sets market value and inspects for health and safety issues that could violate FHA property standards. Appraised value, your age, and current interest rates set your final loan amount.

At closing, the purchase contract and the reverse mortgage execute simultaneously. The seller receives the full purchase price through a combination of your cash and the loan proceeds. A title company or settlement agent handles distribution and provides a Closing Disclosure listing every fee and credit. You make no monthly mortgage payments after that. The balance grows as interest and MIP accrue.

What You’re Still Responsible For After Closing

No monthly mortgage payment doesn’t mean no financial responsibility. You must keep paying property taxes, homeowners insurance, flood insurance if applicable, and any HOA fees.⁸ Falling behind can put the loan into default and trigger foreclosure, even though you’ve never missed a payment on the loan itself. This is where HECM borrowers most often run into trouble.

You also have to maintain the home to FHA standards and sign an annual occupancy certification confirming it’s still your primary residence.¹ If you spend more than 12 consecutive months in a healthcare facility and no co-borrower is living in the home, the property no longer counts as your principal residence and the loan becomes due.⁸

If Your Spouse Is Under 62

A spouse under 62 can’t be a borrower, but federal rules allow them to be designated an Eligible Non-Borrowing Spouse at closing. That designation decides whether they can stay in the home after you die without the loan being called due.⁹

At closing, the spouse has to be married to the borrower, disclosed to the lender, named in the loan documents as an Eligible Non-Borrowing Spouse, and living in the home as a primary residence.¹⁰ After the borrower’s death, the surviving spouse must get legal ownership or another legal right to remain for life within 90 days, keep the home as a principal residence, and continue paying taxes, insurance, and maintenance.

A spouse who isn’t disclosed and designated at origination is an Ineligible Non-Borrowing Spouse, and the deferral simply doesn’t apply. The loan becomes due at the borrower’s death, and the surviving spouse would have to refinance, buy the home outright, or sell.⁹ Naming a younger spouse as Eligible does reduce loan proceeds, because the calculation uses the younger spouse’s age, but the protection is almost always worth it.

What Happens When the Loan Ends

The loan becomes due when the last surviving borrower (or Eligible Non-Borrowing Spouse in a deferral) dies, sells, or moves out permanently. The balance owed at that point is the original proceeds plus years of accrued interest and mortgage insurance. For borrowers who stayed a long time, the balance can approach or exceed the home’s market value.

A HECM is a non-recourse loan. You and your heirs can never owe more than the home is worth.¹¹ If the balance is $450,000 on a $350,000 home, the home’s value is the most anyone owes. FHA’s insurance fund covers the lender’s loss.

After the borrower dies, heirs receive a due and payable notice and have 30 days to indicate whether they want to keep the home, sell it, or turn it over to the lender. The timeline can be extended to six months to allow for a sale or financing.¹² Heirs who want to keep the home can satisfy the debt by paying the full loan balance or 95 percent of the current appraised value, whichever is less. If the home has appreciated beyond what’s owed, heirs pay off the balance and keep the remaining equity. If the balance exceeds value, the 95 percent rule caps what heirs pay and FHA insurance absorbs the rest. Heirs can also simply sell, repay the loan from the proceeds, and keep any surplus.

Who the Program Fits

HECM for Purchase works well in a specific set of circumstances. The strongest candidate is someone selling a fully or mostly paid-off home and using the proceeds to buy another one, often to downsize, move closer to family, or find a home that’s easier to live in with age. The sale covers the cash contribution, and the reverse mortgage finances the rest with no monthly payment.

It’s a poor fit if you’re stretching to meet the down payment, because taxes, insurance, and maintenance can still create pressure. Equity will shrink over time rather than grow, since the balance climbs while the home’s value may or may not keep pace. For borrowers who plan to leave the home to heirs, that erosion of equity is the central trade-off.¹

1
U.S. Department of Housing and Urban Development (HUD). HUD FHA Reverse Mortgage for Seniors (HECM)
2
Consumer Financial Protection Bureau. Can Anyone Take Out a Reverse Mortgage Loan?
3
eCFR. 24 CFR Part 206 – Home Equity Conversion Mortgage Insurance
4
Federal Register. Federal Housing Administration (FHA) – HECM for Purchase Acceptable Monetary Investment Funding Sources and Interested Party Contributions
5
U.S. Department of Housing and Urban Development (HUD). HUD’s Federal Housing Administration Announces 2026 Loan Limits
6
Consumer Financial Protection Bureau. How Much Does a Reverse Mortgage Loan Cost?
7
Department of Housing and Urban Development (HUD). HECM Financial Assessment and Property Charge Guide
8
Consumer Financial Protection Bureau. What Are My Responsibilities as a Reverse Mortgage Loan Borrower?
9
eCFR. 24 CFR Part 206 Subpart B – Eligible Borrowers
10
eCFR. 24 CFR 206.55 – Deferral of Due and Payable Status for Eligible Non-Borrowing Spouses
11
Consumer Financial Protection Bureau. Comment for 1026.33 – Requirements for Reverse Mortgages
12
Consumer Financial Protection Bureau. With a Reverse Mortgage Loan, Can My Heirs Keep or Sell My Home After I Die?