Can I Buy a House with a Reverse Mortgage: Down Payment and Costs

Yes, you can buy a house with a reverse mortgage. The FHA’s Home Equity Conversion Mortgage for Purchase program, known as HECM for Purchase, lets buyers age 62 and older combine a substantial cash down payment with reverse mortgage proceeds to buy a new primary residence, with no monthly mortgage payments for the life of the loan. Congress authorized the program in the Housing and Economic Recovery Act of 2008, and HUD most recently broadened the acceptable down payment sources in late 2023.¹

Who Qualifies and Which Homes Are Eligible

Federal law requires the borrower to be at least 62 years old, or to have a spouse who is at least 62.² If one spouse in a couple is under 62, that younger spouse can be listed as an Eligible Non-Borrowing Spouse on the loan documents instead of a co-borrower. The property has to be your primary residence, meaning you live there most of the year.³

Eligible properties include single-family homes and two-to-four-unit buildings where you occupy one unit. Manufactured homes qualify if they were built after June 15, 1976, and are permanently attached to a foundation under HUD guidelines. Condominiums must appear on the FHA-approved list or clear a spot-approval review of the HOA’s finances. Every property must meet FHA’s minimum standards for structural soundness, safety, and working utilities.⁴

How Much Cash You’ll Need to Bring

The reverse mortgage covers only a portion of the purchase price. You bring the rest to closing. In practice, most buyers need somewhere between 45 and 62 percent of the purchase price in cash, with younger borrowers on the higher end.

The share the loan covers is called the principal limit, and three factors set it: your age (or the age of the youngest borrower or eligible non-borrowing spouse), the expected interest rate when you apply, and the home’s appraised value or the FHA lending cap, whichever is lower. For 2026, that national cap is $1,249,125 and applies uniformly, including in Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

Older borrowers get a bigger percentage of the home’s value. At a 5.875 percent expected rate, a 62-year-old’s principal limit factor is about 36 percent, while a 90-year-old’s is roughly 62 percent. Lower interest rates push those percentages up because the loan balance grows more slowly; higher rates pull them down. That is the opposite of a conventional mortgage, where rates change your payment rather than how much you can borrow.

Where Your Down Payment Can Come From

HUD has historically limited down payment funds to your own savings, liquidated investments, or proceeds from selling a prior home. Borrowing the down payment through credit cards, personal loans, or any other secondary debt is still prohibited.

A 2023 Federal Register notice expanded the acceptable sources to include gifts from family or other parties, employer assistance programs, disaster relief grants, and lender premium pricing credits.¹ The gift provision alone opens the door for adult children to help fund a parent’s purchase, which the old rules on third-party contributions blocked.

Sellers can contribute toward closing costs, but only for items customary in the local market or required by state or local law, plus a home warranty.⁵ Seller concessions cannot go toward your required down payment.

Costs Built Into the Loan

Several costs are typically financed into the loan balance rather than paid out of pocket. That keeps cash requirements down, but each one reduces your equity from day one.

Upfront mortgage insurance premium of 2 percent of the appraised value or the FHA lending limit, whichever is lower. On a $400,000 home, that is $8,000.
Annual mortgage insurance premium of 0.5 percent of the outstanding balance, charged monthly and added to what you owe. Because each month’s charge gets added to the balance, future interest accrues on the larger amount.
Origination fee equal to the greater of $2,500 or 2 percent of the first $200,000 of the maximum claim amount plus 1 percent above $200,000, capped at $6,000.⁵
Third-party settlement costs for title insurance, appraisal, recording, and similar charges, comparable to any home purchase.

The upfront MIP and origination fee are the big-ticket items. Together they can run $10,000 to $18,000 on a mid-priced home. Financing them into the loan means your starting balance is already higher than what actually went toward the house.

Counseling Before You Apply

You cannot formally apply until you complete a session with a HUD-approved counselor. The session covers how the loan works, what it costs, what triggers repayment, how it affects your estate, and what alternatives exist. There is no fixed fee, but agencies must set reasonable charges and must waive the fee for anyone whose income falls below 200 percent of the federal poverty level. Agencies cannot withhold the certificate for inability to pay.

After the session, the counselor issues Form HUD-92902, the certificate your lender needs to process the application.⁶ The certificate expires 180 days after the session date, so don’t complete counseling too far ahead of finding a property.

Fixed-Rate or Adjustable-Rate

HECM for Purchase loans come in two forms. A fixed-rate HECM locks the interest rate for the life of the loan but requires all proceeds to be disbursed as a single lump sum at closing. For a purchase, that usually fits, because the money goes straight to the seller. Any unused principal limit is lost.

An adjustable-rate HECM lets you draw funds in multiple ways: a lump sum at closing plus a line of credit for later, monthly advances, or a combination. The rate adjusts periodically with market indexes, but the mortgage margin stays constant. For a purchase, the adjustable option can make sense if you want to hold back part of your available funds as a credit line for future needs such as home modifications or medical costs. The unused portion of a HECM credit line grows over time at a rate tied to the loan’s interest rate.

Steps to Close the Purchase

The process resembles a conventional purchase with a few HECM-specific steps layered in.

Complete counseling and get your HUD-92902 certificate before anything else.
Find a property and negotiate a purchase contract. Make sure the seller understands the HECM timeline, which runs a little longer than a conventional closing.
Apply with an FHA-approved lender, submitting the counseling certificate, income documentation, and asset verification.
The lender orders an FHA appraisal to establish market value and confirm the property meets FHA health and safety standards. If repairs are needed, they must be completed before closing.⁷
Underwriting completes the financial assessment, calculates your principal limit, and determines whether a Life Expectancy Set-Aside is required.
At closing, your down payment and the reverse mortgage proceeds combine to pay the seller. Upfront MIP and origination are typically financed into the balance. A settlement agent handles the deed transfer and records the mortgage lien.

Application to closing usually takes 45 to 60 days, though appraisal repairs or title issues can stretch that timeline.

Ongoing Obligations After You Move In

You will not make monthly mortgage payments, but the loan comes with responsibilities that can trigger default if you ignore them. You must keep up with property taxes, homeowners insurance, flood insurance if applicable, and any HOA fees, and you must maintain the home in good condition.⁵ Falling behind on any of these can make the entire loan due and payable.

Before approving the loan, the lender conducts a financial assessment that reviews credit history, cash flow, and residual income to gauge whether you can cover these expenses over time.⁸ If the assessment raises concerns, the lender will require a Life Expectancy Set-Aside, which carves out a portion of your loan proceeds specifically for future tax and insurance payments.⁹ A set-aside reduces the cash available for your down payment, which can mean bringing more money to closing or looking at a less expensive property.

When the Loan Becomes Due

A HECM for Purchase does not have a fixed maturity date. Specific events trigger repayment:

The last surviving borrower dies and no eligible non-borrowing spouse remains in the home.
The property is no longer your primary residence for any reason other than a temporary medical stay.
You are away for medical reasons for more than 12 consecutive months and no other borrower lives in the home.⁵
You fail to pay property taxes, insurance, or HOA fees, or let the property deteriorate and don’t cure the default after notice.
You sell or transfer title and no other borrower keeps ownership.

The 12-month medical absence rule catches people off guard more than any other trigger. A borrower who enters assisted living expecting to return home may not realize the clock is already running. If a co-borrower continues living in the property, the loan stays in place regardless of the other borrower’s absence or death.

Non-Recourse Protection

The HECM is a non-recourse loan. Neither you nor your heirs will ever owe more than the home’s appraised value when the loan becomes due, even if the outstanding balance has grown larger than what the home is worth. The mortgage insurance premiums you pay throughout the life of the loan cover any shortfall.¹⁰

Protecting a Spouse Under 62

If your spouse is under 62 and listed as an Eligible Non-Borrowing Spouse in the loan documents at closing, HUD allows a deferral period that postpones the due-and-payable status after the borrowing spouse dies or permanently moves out. The surviving spouse can remain in the home without repaying the loan as long as they continue to live there as their primary residence, keep paying property taxes and insurance, and maintain the property.¹¹

The requirements have to be met at loan origination. The spouse must have been married to the borrower at closing, properly disclosed to the lender, and named in the loan documents. A spouse who wasn’t disclosed at origination cannot become eligible later, even if they marry the borrower after the loan closes. Within 90 days of the borrower’s death, the surviving spouse must also establish a legal ownership interest or other legal right to remain in the property for life.¹¹

A spouse who doesn’t qualify for the deferral faces a much harsher outcome. If the borrowing spouse dies and the surviving spouse is ineligible, the loan becomes due immediately, and the surviving spouse would need to pay off the full balance through refinancing or other funds to stay in the home.¹² Getting this designation right at closing is one of the most consequential decisions in the process.

What Your Heirs Will Face

When the last surviving borrower dies and no eligible non-borrowing spouse remains, the lender sends a due-and-payable notice to the heirs. From that point, heirs have 30 days to decide whether to buy, sell, or surrender the home. The timeline can be extended up to six months if heirs are actively working to sell the property or arrange financing to keep it.¹⁰

Heirs have three basic options. They can pay off the loan balance in full and keep the home, which makes sense if the home is worth more than the debt. They can sell the property and keep any equity left after the loan is satisfied. Or, if the loan balance exceeds the home’s current value, they can sell for at least 95 percent of the appraised value and the FHA insurance covers the shortfall.¹⁰ Heirs are never personally liable for any amount beyond what the home sells for. Families often don’t learn about these timelines until after a parent’s death, when probate and grief make quick financial decisions difficult. A conversation with your heirs about the loan now saves them from scrambling later.

1
Federal Register. Federal Housing Administration (FHA) HECM for Purchase – Acceptable Monetary Investment Funding Sources and Interested Party Contributions
2
Office of the Law Revision Counsel. 12 USC 1715z-20 – Insurance of Home Equity Conversion Mortgages
3
Consumer Financial Protection Bureau. Can Anyone Take Out a Reverse Mortgage Loan?
4
eCFR. 24 CFR Part 200 – Introduction to FHA Programs
5
eCFR. 24 CFR Part 206 – Home Equity Conversion Mortgage Insurance
6
Department of Housing and Urban Development. Certificate of HECM Counseling
7
Department of Housing and Urban Development. Logging an Appraisal
8
Federal Register. Federal Housing Administration – Strengthening the Home Equity Conversion Mortgage Program
9
Department of Housing and Urban Development. HECM Financial Assessment – Case Processing Overview
10
Consumer Financial Protection Bureau. With a Reverse Mortgage Loan, Can My Heirs Keep or Sell My Home After I Die?
11
eCFR. 24 CFR 206.55 – Deferral of Due and Payable Status for Eligible Non-Borrowing Spouses
12
Consumer Financial Protection Bureau. Does Having a Reverse Mortgage Impact Who Can Live in My Home?