Reverse Mortgage for Purchase

Why Use a Reverse Mortgage to Purchase a Home?

How a Reverse Mortgage for Purchase Works

Instead of paying the full purchase price in cash or taking on a traditional mortgage payment, the buyer contributes a portion of the purchase price and the reverse mortgage provides the remaining funds.

How Much Cash Is Needed to Purchase?

The amount a buyer contributes toward the purchase depends on several factors, including age, purchase price, interest rates, and the reverse mortgage program being used.

• Older buyers generally qualify for a larger reverse mortgage amount, which can reduce the cash needed at closing.
• Higher purchase prices require more available funds, especially when the home price exceeds program limits.
• Closing costs are part of the total transaction, so the buyer’s required funds should be reviewed as a complete cash-to-close amount.

Because the required investment can vary significantly from one buyer to another, a personalized purchase analysis is the best way to determine the actual cash needed.

How Homebuyers Use a Reverse Mortgage for Purchase

What Types of Homes Can Be Purchased?

Reverse mortgage purchase programs can be used for a variety of primary residences, although property requirements vary by program.

• Single-family homes
• Townhomes
• FHA-approved condominiums for HECM transactions
• Certain manufactured homes that meet program requirements
• Some proprietary programs may offer additional property options, depending on the lender and program

The home must become the buyer’s primary residence, and property eligibility should be reviewed early in the purchase process.

A Useful Option for Buyers, Families, and Real Estate Professionals

A Reverse Mortgage for Purchase can be especially useful when a buyer wants to preserve more cash, increase purchasing power, or avoid taking on a required monthly mortgage payment in retirement.

Is a Reverse Mortgage for Purchase Right for Everyone?

No. It can be a valuable option for some homebuyers, but it should be compared with paying cash, using a traditional mortgage, downsizing, or other financing strategies.

• It may be worth considering if you want to preserve more retirement assets
• It can help if you want to increase purchasing power
• Buyers should understand that the loan balance generally increases over time
• Ongoing responsibilities such as property taxes, homeowners insurance, and property maintenance still apply
• The impact on future home equity and heirs should be part of the decision

The goal is to compare the numbers and determine which purchase strategy best supports the buyer’s overall retirement plan.

What Does the Purchase Process Look Like?

1. Review Your Options
Compare HECM and proprietary purchase programs and estimate the required cash investment.

2. Complete a Preapproval
Provide the basic financial and property information needed to determine eligibility and purchasing power.

3. Find the Home
Shop for a property that fits your goals and meets program requirements.

4. Complete the Loan Process
The transaction moves through counseling, appraisal, underwriting, and closing requirements based on the program selected.

5. Close on the Home
You contribute the required funds, the reverse mortgage provides the eligible loan proceeds, and you take ownership of the property.

See How a Reverse Mortgage for Purchase Can Work

Here are two examples of how buyers may use a Reverse Mortgage for Purchase to preserve cash and create more flexibility in retirement.

Downsizing with Cash Left Over

Jane and Robert, both 70, sold their large family home for $700,000. Instead of buying a smaller $600,000 home with all cash, they used a HECM for Purchase. With a $360,000 down payment, the reverse mortgage covered the rest. They kept $340,000 in retirement savings and now live payment-free with a greater probability of success that they will not run out of money in their lifetime.

Upgrading Without Monthly Payments

Linda, age 65, lives in a two-story home worth $500,000. She wanted a single-level home in a 55+ community priced at $600,000. Using a reverse mortgage and $390,000 down, she purchased the home and retained over $110,000 in reserves for her retirement plan— with no monthly payments.  This allowed her to afford a better suited home in a more desirable community, plus unlock a portion of her housing wealth to put in savings.

Prefer to learn more first? The Reverse Mortgage for Purchase Guide provides a clear overview of how the program works, what to consider, and how it may fit your next move.

Common Questions About Reverse Mortgage for Purchase

Do I still own the home?
Yes. You take title to the property just like with other financing.

Do I have to make monthly mortgage payments?
No required monthly mortgage payment is generally due, but you must continue paying property taxes, homeowners insurance, and maintaining the home.

Can I use this for a condo or townhome?
Potentially, yes. Property eligibility depends on the program and specific property requirements.

Can I use a proprietary reverse mortgage instead of a HECM?
In some cases, yes. Proprietary purchase options may be available depending on age, state, home value, and program guidelines.

How do I know how much cash I’ll need at closing?
The required amount depends on factors such as age, purchase price, interest rates, and the reverse mortgage program selected.

Get Clear Guidance Before You Buy

A Reverse Mortgage for Purchase can be a powerful option, but the right structure depends on the buyer, the property, and the long-term plan. Our goal is to help you compare the available options and understand the numbers before you make a decision.

Helpful Reverse Mortgage for Purchase Resources

• View the Reverse Mortgage for Purchase Guide →
• Learn More About How Reverse Mortgages Work →
• Reverse Mortgage Safety & Education at NRMLA →