Yes, you can use a Home Equity Conversion Mortgage for Purchase to buy a house from a family member when you will occupy it as a principal residence and you still bring the cash 24 CFR 206.44 requires. Jay Zayer, CRMP, is a reverse mortgage specialist at reversemortgage.coach. A relative on the other side of the contract does not create a HUD family exemption. It also does not create an automatic deny.
Suppose a borrower named Lila, 69, in Surprise, Arizona, wants to buy her brother’s paid-off ranch using HECM for Purchase so she can live near him without a new forward coupon. She is 62 or older. She will occupy. The purchase still needs a real contract, a real appraisal, and a real cash investment. Model that investment after price, age, and costs. I will not quote a live principal-limit cell. Capacity still sits in the mid-30s to low-50s percent of appraised value, depending on age and expected rate.
A HECM is FHA-insured. It is not a government benefit and it is not a family-transfer grant.
Can HECM for Purchase fund a house I am buying from a relative?
Yes, when 24 CFR 206.33 age, 24 CFR 206.39 occupancy, and 24 CFR 206.44 cash are all true, and the property meets 24 CFR 206.45. See what HECM for Purchase is for the investment formula. Stay here for the family-seller overlay.
The brother in Surprise is an interested party under 24 CFR 206.44(c). Permissible seller-paid items are narrow: fees the seller must pay under state or local law, fees customarily paid by sellers in that locality, and a home-warranty policy the seller buys. Extra “I’ll just cover your closing costs, Sis” money is not a free extra down payment because the seller is family.
Counseling still costs $125–$175. The HUD certificate lasts 180 days. Arizona has no California Civil Code 1923.2(k) seven-day wait, but the purchase contract still has to survive counseling and appraisal. Do not write a seven-day close on a family handshake.
A family HECM for Purchase still pays 2.00% initial MIP of claim amount under Mortgagee Letter 2017-12. Family-sale claim amount is still capped at $1,249,125 for 2026 case numbers under Mortgagee Letter 2025-22. Origination is still capped at $6,000 under 24 CFR 206.31. A family price does not discount MIP.
How is a below-market family sale treated when HUD sizes maximum claim amount?
HUD does not let a cheap family contract invent extra proceeds. Claim amount is still the lesser of appraised value and the national cap. 24 CFR 206.44 then asks for cash equal to price minus principal limit plus unfinanced HECM fees, minus earnest money. A below-market price can reduce the cash you bring. It can also look like a gift of equity from the seller.
Gift-of-equity treatment is an underwriter exhibit. I will not invent a HUD percentage or a seasoning day count. Confirm that overlay with the underwriter. Needs-Jay already has parallel overlay questions on gift deeds. This page will not fill the gap with a made-up identity-of-interest LTV cap.
An FHA roster appraisal is still required. A family “we all know what it is worth” speech is not an appraisal. If the brother lives in the house until closing, occupancy after closing is still Lila’s test, not his.
A second geography: a 72-year-old in Riverside buying Mom’s house for “what the taxes say.” California property-tax assessed value is not FHA appraised value. Type the contract price and the appraisal into the worksheet, not the tax roll.
What 24 CFR 206.44 cash must I still bring when the seller is my child or sibling?
The same cash any HECM for Purchase requires. Borrowers may use cash on hand, cash from selling assets, HECM proceeds, and other funding sources the Commissioner has approved by notice. A family seller is not a fourth silent source. Do not recycle the brother’s sale proceeds back to Lila as her “down payment” in a circle.
Interested-party contributions that exceed what 24 CFR 206.44(c) allows will be a condition, not a favor. I work with multiple lenders. Overlays on family sales can be tighter than the regulation. I will not invent those overlays as HUD rules.
If residual income later requires a LESA, that set-aside is still origination-only on a purchase file. Buying from family does not let servicing add a LESA after you move in.
Jay’s refinance average of about 30 days does not govern a family HECM for Purchase calendar. A purchase is not that refinance clock. A family contract with a missing payoff, an unpermitted addition, or a seller who will not move out is how a purchase calendar breaks.
An adjustable H4P still accrues at 1-month CMT plus lender margin. Expected rate still rounds to 0.125% under 24 CFR 206.3.
Who should not use a family sale to skip occupancy or a real appraisal?
This path does not help a household that wants Lila to “buy” the Surprise house while the brother keeps living there as the real occupant. 24 CFR 206.39 is occupancy, not a family story. It does not help a vacation house the family will share. It does not help a sale whose only appraisal is a Zillow printout.
Heirs who later keep a family-purchase HECM house repay the outstanding loan balance under 24 CFR 206.125(a)(2)(i). Buying from a relative does not rewrite that subsection into a 95% keep-the-house discount.
I will originate a family HECM for Purchase when the contract, the occupancy, and the cash are real. I will turn away a handshake sale whose plan is to skip counseling because “it’s just family.”