HECM Purchase Program: Reverse Mortgage to Buy Retirement Home

Most people think reverse mortgages only work on homes you already own. What if we told you there’s a reverse mortgage program that lets you BUY your retirement home without monthly mortgage payments?

The HECM for Purchase program combines home buying with reverse mortgage benefits, allowing seniors to purchase new homes using substantial down payments while eliminating monthly mortgage payments. It’s one of the mortgage industry’s best-kept secrets—a powerful tool few seniors know exists.

This isn’t a refinance product—it’s a purchase program specifically designed for retirees who want to:

• Downsize to more suitable homes
• Move closer to family
• Relocate to retirement-friendly areas
• Right-size for aging in place
• Buy more practical properties

All while maintaining monthly cash flow by eliminating mortgage payments.

In this guide, you’ll discover:

• How HECM for Purchase works (authorized by HUD)
• Down payment requirements and calculations
• Who benefits most from this program
• Real scenarios showing strategic uses
• Qualification requirements
• How it compares to traditional purchases

This unique program solves retirement home purchase challenges conventional mortgages can’t address.

Considering downsizing or relocating in retirement? Schedule a call to explore HECM for Purchase options.

What Is HECM for Purchase and How Does It Work?

HECM for Purchase lets you buy homes using reverse mortgage financing, combining your down payment with a reverse mortgage loan to complete purchases without monthly mortgage payments.

Basic Structure

You provide substantial down payment (typically around half the purchase price, though the exact amount depends on your age, interest rates, and home value).

HECM loan covers the remainder of the purchase price, with no monthly mortgage payments required.

You own the home completely with your name on the title—this isn’t rent-to-own or shared equity. You’re the sole owner.

No monthly payments as long as you live in the home, pay property taxes and insurance, and maintain the property.

Loan becomes due when you permanently leave the home, with non-recourse protection ensuring you never owe more than the home’s value.

Example Scenario

Home purchase price: Let’s say a property costs a moderate amount.

Your down payment: You provide substantial funds (exact percentage based on your age and rates).

HECM loan amount: The reverse mortgage covers the remaining purchase price.

Monthly mortgage payment: Zero—you only pay property taxes, insurance, and maintenance.

This structure lets you buy appropriate retirement homes without stretching budgets with monthly payments, preserving cash flow for other retirement expenses.

Why Would Someone Use HECM for Purchase?

Several retirement scenarios make HECM for Purchase strategically valuable:

Downsizing from Larger Family Homes

You’ve raised your family in a larger home that’s now too big, too expensive to maintain, and not suitable for aging in place. You want to move to a more practical property.

Traditional scenario: Sell current home, buy smaller property with conventional financing, start making monthly mortgage payments again after years of being payment-free or having low payments.

HECM scenario: Sell current home, use proceeds as down payment on right-sized property, eliminate monthly mortgage payments entirely, preserve remaining cash for living expenses.

The advantage: You downsize without adding monthly payment burdens, actually IMPROVING cash flow through the move.

Relocating Closer to Family

Your children and grandchildren live in different areas. As you age, being near family becomes increasingly important for support, connection, and quality of life.

Relocating requires buying in new markets, often with different price points. Traditional mortgages create payment obligations that strain fixed retirement incomes.

HECM for Purchase lets you move near family using home sale proceeds as down payment while avoiding new monthly payment commitments.

Moving to More Age-Appropriate Homes

Your current home has stairs, lacks main-floor bedrooms, requires extensive upkeep, or isn’t suitable for aging with mobility challenges.

Buying single-level homes, properties with accessible features, or condos with reduced maintenance using HECM for Purchase lets you proactively position yourself for successful aging in place without payment stress.

Relocation to Retirement-Friendly Areas

Many retirees want to move to warmer climates, lower cost-of-living areas, or communities with better senior amenities and healthcare.

HECM for Purchase facilitates these strategic relocations without creating payment obligations that might otherwise prevent moves or strain budgets in new locations.

Strategic Wealth Management

Some retirees use HECM for Purchase as part of sophisticated financial planning—accessing home equity through reverse mortgages while preserving liquid assets for investment, emergencies, or other strategic purposes.

How Much Down Payment Do You Need?

Down payment requirements for HECM for Purchase depend on several factors creating variable but predictable outcomes:

Age-Based Calculations

Older borrowers can access more through reverse mortgages, meaning lower required down payments. Younger borrowers (early 60s) need higher down payments.

The youngest spouse’s age determines qualifications if buying jointly, even if only one spouse is on the loan.

Interest Rate Impact

Current interest rates affect how much you can borrow through reverse mortgages. Lower rates mean higher borrowing capacity and lower down payments. Higher rates mean lower borrowing capacity and higher down payments.

Home Value Considerations

Government lending limits cap reverse mortgage amounts, affecting how much down payment you need on more expensive properties.

Typical Down Payment Ranges

Generally, expect to provide down payments representing a substantial portion of the purchase price—commonly around half, though this varies based on the factors above.

This substantial down payment requirement ensures you have significant equity from day one, providing protection and ensuring long-term sustainability.

Using Home Sale Proceeds

Most HECM for Purchase borrowers use proceeds from selling previous homes as their down payment source. If your current home has substantial equity, these proceeds typically cover required down payments comfortably.

Who Qualifies for HECM for Purchase?

Eligibility requirements mirror standard reverse mortgages:

Age Requirements

You must be at least 62 at closing. If married, the youngest spouse must meet this requirement even if not on the loan.

Primary Residence Requirement

The purchased home must become your primary residence within a specific timeframe after closing and remain your primary residence.

Financial Assessment

Lenders evaluate your ability to pay ongoing property taxes, insurance, and maintenance costs. They want assurance you can sustain homeownership responsibilities.

Adequate income or assets to cover these ongoing obligations is essential. The program helps with mortgage payments, but you still need resources for other homeownership costs.

Property Requirements

Eligible properties include single-family homes, FHA-approved condominiums, and manufactured homes meeting certain standards.

Properties must meet FHA appraisal standards and safety requirements.

Credit Considerations

While credit requirements are more flexible than traditional mortgages, lenders still review credit history for patterns suggesting financial responsibility.

Recent serious delinquencies or foreclosures may create challenges, though this program is generally more lenient than conventional financing.

Counseling Requirement

HUD requires completion of counseling with approved agencies before proceeding. This ensures you understand the product thoroughly before committing.

How Does HECM for Purchase Compare to Traditional Purchase Options?

Understanding alternatives helps you appreciate HECM for Purchase advantages:

Conventional Mortgage Purchase

Standard approach: Provide down payment, finance the remainder with traditional mortgage, make monthly payments.

Advantages: Lower down payments possible, builds equity through payments, familiar process.

Disadvantages: Monthly payment obligations, income qualification challenges for retirees, potential cash flow strain.

Cash Purchase

Pay the full purchase price from savings or home sale proceeds without any financing.

Advantages: No debt, no interest, maximum simplicity.

Disadvantages: Depletes liquid assets entirely, leaves no reserves for emergencies, limits financial flexibility.

HECM for Purchase

Combines substantial down payment with reverse mortgage financing eliminating monthly payments.

Advantages: No monthly mortgage payments, preserves cash for other needs, maintains financial flexibility, accessible to retirees without traditional income.

Disadvantages: Higher down payment than conventional mortgages, accruing interest increases loan balance, upfront costs.

What Are the Costs and Considerations?

HECM for Purchase includes expenses you should understand before proceeding:

Upfront Costs

Origination fees for loan processing (capped by regulations).

Mortgage insurance premiums both upfront and annually (FHA requirement for HECM loans).

Standard closing costs including appraisals, title insurance, inspections, and recording fees.

These costs can be financed into the loan, meaning they’re paid through increased loan balance rather than out-of-pocket, though this means paying interest on fees over time.

Ongoing Obligations

Property taxes remain your responsibility—failure to pay can trigger default.

Homeowners insurance must be maintained continuously.

Property maintenance keeping the home in good condition is required.

HOA fees if applicable to your property.

Accruing Interest

Interest accumulates on your loan balance, meaning what you owe grows over time. This reduces equity but doesn’t create payment obligations.

Over many years, substantial equity can be consumed by growing loan balances, affecting inheritance but not your ability to remain in the home.

Impact on Estate

Less equity remains for heirs when the loan becomes due. Your estate or heirs will need to repay the loan (typically through sale) or refinance to keep the property.

Non-recourse protection ensures your estate never owes more than the home’s value.

What Real-World Scenarios Show HECM for Purchase Value?

Understanding practical applications illustrates this program’s power:

The Empty Nesters

Robert and Maria lived in their large family home. All three kids had moved out years ago. The house felt too big, maintenance was becoming burdensome, and it had stairs they were starting to struggle with.

They sold for a substantial amount, netting significant proceeds after payoff. They found a perfect single-level condo in a 55+ community closer to their daughter.

Using HECM for Purchase, they put substantial funds down and financed the remainder with a reverse mortgage. Their monthly housing costs dropped dramatically—no mortgage payment, just lower property taxes and HOA fees.

The result: Better-suited home, proximity to family, improved cash flow, and substantial remaining funds for travel and grandchildren.

The Retiree Relocating to Warmer Climate

Patricia lived in the Northeast but dreamed of retiring to Florida near her sister. She sold her paid-off home and wanted to buy in Florida without depleting her savings or taking on monthly payments.

HECM for Purchase let her buy the Florida home she wanted, using sale proceeds as down payment while preserving cash for her new lifestyle and emergencies.

No monthly mortgage payment meant her fixed retirement income comfortably covered all expenses in her new location.

See similar success in this reverse mortgage case study showing a retired teacher purchasing their dream retirement home.

The Widow Right-Sizing

After her husband passed, Eleanor couldn’t maintain their two-story family home alone. She needed something smaller, more manageable, on one level.

She used HECM for Purchase to buy a perfect ranch-style home in a quiet neighborhood. Sale proceeds from the family home covered the down payment, and eliminating monthly mortgage payments gave her financial peace during an emotionally difficult transition.

How Does Stairway Mortgage Help With HECM for Purchase?

HECM for Purchase requires specialized knowledge and experience most lenders lack. At Stairway Mortgage, we guide seniors through this unique program:

We help you determine if HECM for Purchase fits your retirement strategy better than alternatives, analyzing your complete financial picture.

We calculate your specific down payment requirements based on your age, target home prices, and current rates, showing exactly what you’ll need.

We coordinate timing between selling your current home and purchasing your new property, ensuring smooth transitions without being homeless or carrying two properties.

We explain all costs, long-term implications, and effects on your estate, ensuring you make fully informed decisions.

We connect you with HUD-approved counselors required for reverse mortgages, guiding you through required educational steps.

Many seniors we’ve worked with successfully used HECM for Purchase to relocate strategically, downsize appropriately, or move closer to family—all while improving their monthly cash flow and maintaining financial flexibility.

Ready to Explore HECM for Purchase for Your Retirement Move?

HECM for Purchase solves unique retirement home buying challenges conventional financing can’t address—letting you relocate, downsize, or buy more appropriate homes without monthly mortgage payment burdens straining fixed incomes.

Your next steps:

If you’re considering selling and buying a more suitable retirement home, schedule a call to discuss whether HECM for Purchase fits your strategy.

Explore related options:

• Review reverse mortgage basics for complete program understanding
• Read reverse mortgage case studies showing successful purchases
• Calculate conventional alternatives for comparison

Remember: HECM for Purchase isn’t right for everyone, but for seniors making strategic retirement moves with substantial home equity from previous properties, it can transform relocations from financially stressful to financially liberating.