HECM for Purchase is the FHA program that lets a borrower 62 or older buy a principal residence using a HECM instead of a new forward mortgage. 24 CFR 206.44 requires a cash investment equal to the purchase price minus the principal limit, plus closing costs that are not financed. Jay Zayer, a CRMP licensed in California and Arizona, treats H4P as a down-payment-heavy purchase, not as “buying a house with no money.”
You still counsel first (24 CFR 206.41). You still occupy the home (24 CFR 206.39). California’s seven-day wait after counseling (Civil Code section 1923.2(k)) must be built into the purchase contract.
How the required cash investment is built
Appraised value and contract price interact with the maximum claim amount, capped at $1,249,125 in 2026 (Mortgagee Letter 2025-22). The principal limit is a HUD factor times that claim amount. At expected rates in the mid-to-upper 6% range, that factor is typically in the mid-30s to low-50s by age. Subtract the principal limit from the price. Add MIP of 2.00% of claim amount (Mortgagee Letter 2017-12), origination, title, and other unfinanced fees. That stack is the check you bring.
Sellers cannot gift that investment in ways FHA forbids. Interested-party contributions have HUD limits. A “we’ll cover closing” clause that violates those limits breaks the file.
Work the stack on the calculator before you write an offer.
Contract timing that H4P files miss
Counseling, California’s seven days, appraisal, FHA case assignment, and condo approval all sit inside a purchase escrow. A 17-day escrow copied from a cash buyer is how H4P dies. Write a longer close. Make FHA-required repairs a negotiated item.
Arizona contracts skip the Civil Code pause but still need counseling before a complete application. Do not schedule funding for the day after the certificate.
Existing HECM refinance habits do not map cleanly onto a purchase. There is no TILA rescission on a purchase the way a refinance of your current home has. Funding follows the purchase settlement.
When H4P is the wrong purchase tool
If you need the seller to carry paper, or if the cash investment would empty reserves you need for living expenses, a smaller house or a sale-and-rent path may be safer. If the target is a non-FHA condo, H4P will not fix the project.
For property types, see which homes qualify. For the refinance sequence rather than a purchase, see how a reverse mortgage works.
How do you build the cash-to-close figure without guessing?
24 CFR 206.44 requires a monetary investment equal to the difference between the principal limit and the purchase price of the home, plus HECM loan-related fees that are not financed, minus any earnest money already applied. Financing initial MIP and fees from the principal limit raises cash needed by the same amount. If price exceeds the 2026 maximum claim amount of $1,249,125 (Mortgagee Letter 2025-22), HECM proceeds are still capped at claim amount times the factor.
Walk through the arithmetic on a $750,000 purchase at age 68. At a 7.000% expected rate as of 22 September 2026, the published factor produces a $267,750 principal limit (hecm-factors.md). The site closing-cost stack on that price is $15,000 initial MIP + $6,000 origination at the 24 CFR 206.31 cap + $4,000 third-party, or $25,000. Required investment including those costs is about $507,250, or 67.6% of price. That is a large check. It is not a no-money purchase.
- Write a contract long enough for counseling, California’s seven-day wait if the property is in California (Civil Code section 1923.2(k)), appraisal, and FHA case assignment.
- Confirm the project is FHA-approved if the target is a condo.
- Lock the cash-investment number from a current expected-rate worksheet, not from last spring’s memory.
- Keep earnest money inside FHA’s interested-party contribution limits.
- Do not schedule movers for a 17-day escrow copied from a cash buyer.
This product does not help a buyer who needs the seller to finance the cash investment in a way FHA forbids. It does not help a household whose reserves would be emptied by that check. It does not help a non-FHA condo. Jay will say to buy a different house or keep a forward loan rather than originate a file that the cash stack will kill.
What can go wrong: the appraisal comes in below price, the principal limit drops, and the buyer cannot raise the difference before the close date. Price reductions and extra cash are the only honest fixes. A “seller credit” that violates HUD limits is not a fix.
There is no TILA rescission on a purchase of a new principal dwelling the way 12 CFR 1026.23 applies to a refinance of a home you already own. Funding follows the purchase settlement. See purchase-loan costs for the worked tables that match hecm-factors.md.
A follow-up: can gift funds from a child cover the required investment? Sometimes, when FHA’s source-of-funds and interested-party rules are met. A seller credit that violates those limits is not the same as a family gift. Document the gift. Do not hide it as a price cut. A broken contribution clause is how H4P files die after the inspection.