Can I Use a Reverse Mortgage to Buy a New Home?

This is one of the most underused programs in retirement housing. Most people assume their only options are paying cash or taking on a new monthly mortgage. HECM for Purchase creates a third path: buy the home you want, put down a calculated amount, and eliminate the monthly payment — while keeping the rest of your assets liquid.

This guide explains how the program works, where the down payment comes from, California-specific considerations, and when purchase makes more sense than refinancing the home you already own.

The HECM for Purchase program

HECM for Purchase was created by HUD to let eligible borrowers buy a new primary residence and finance a portion with a reverse mortgage in one closing. Rather than buying with a traditional mortgage and later refinancing into a reverse mortgage, you do both at once.

According to HUD's HECM for Purchase guidance, the program uses the same consumer protections as standard HECMs: independent counseling, financial assessment, non-recourse protection, and FHA insurance. For a full program overview, see our HECM for Purchase guide and reverse mortgage for purchase overview.

Proprietary reverse mortgage programs also offer purchase options for California homeowners as young as age 55 — particularly useful on homes above the 2026 FHA lending limit of $1,249,125. See proprietary reverse mortgages and HECM for Purchase California 2026.

How the purchase process works

1. Identify the home you want to purchase and confirm it meets eligibility requirements
2. Get pre-approved — the lender calculates how much the HECM will finance based on your age, home value, and rates. See Principal Limit Factor.
3. Determine your required down payment — the difference between purchase price and HECM proceeds. See down payment guide.
4. Complete HUD counseling before closing
5. Close simultaneously — you take ownership of the new home with the reverse mortgage in place and no monthly mortgage payment

Use the free reverse mortgage calculator to estimate proceeds and required investment for your target purchase price.

Down payment examples

The required down payment (called the "required investment") typically ranges from 45–65% of the purchase price. The older you are, the higher your Principal Limit Factor and the smaller the down payment.

Illustrative estimates only. Actual proceeds depend on age, expected rate, and property type.

Where the down payment comes from

Common eligible sources:

• Proceeds from selling your current home — the most common source for downsizing buyers
• Savings or investment accounts — IRA distributions, brokerage proceeds, CDs
• Gift funds — from family members, subject to lender documentation requirements
• Proceeds from an existing reverse mortgage on another property being sold simultaneously

You cannot use the reverse mortgage itself to fund the down payment — it must come from your own eligible sources. The down payment must be verified and seasoned per lender guidelines.

Real-world example

A 70-year-old sells a $900,000 home in San Marcos and wants to purchase a $600,000 condo closer to adult children in Carlsbad. Rather than paying $600,000 cash and tying up everything, she uses HECM for Purchase:

• Purchase price: $600,000
• HECM proceeds (age 70): ~$300,000
• Required down payment: ~$300,000
• Remaining from home sale: ~$600,000 stays liquid
• Monthly mortgage payment: $0

In my experience working with homeowners in San Marcos and Palm Springs, purchase files are often less stressful than refinance files because families start with a clear move objective. A client I worked with in Palm Springs recently used sale proceeds to buy closer to adult children and kept over $300,000 liquid after closing. Her reaction: the strategy felt like downsizing without giving up financial flexibility.

Why retirees choose HECM for Purchase

• Downsize without a monthly payment — move to a more manageable home while preserving cash flow
• Relocate near family — buy in a new area without depleting investment accounts
• Age in place intentionally — purchase a single-story or accessible home designed for long-term living
• Preserve portfolio assets — avoid large cash outlays that reduce retirement investment balances. See preserving investments.
• Simplify housing costs — one down payment, no ongoing mortgage payment, predictable property tax and insurance obligations

Compare with alternatives in our HECM purchase vs. conventional mortgage guide and reverse mortgage vs. downsizing article.

California-specific considerations

California's high home values create both opportunity and complexity for HECM for Purchase:

• Homes above $1,249,125 exceed the HECM cap and may need proprietary purchase programs. Common in San Diego, LA, and Bay Area markets. See San Diego purchase guide.
• Condo eligibility requires FHA project approval or proprietary lender approval. Verify before making an offer on a condo.
• New construction is allowed but may have additional requirements from the builder and lender.
• Proposition 13 tax basis does not transfer to the new home — factor higher property taxes into your budget. See property tax obligations.
• Age-55 proprietary programs open purchase options earlier than HECM's age-62 minimum. See age requirements in California.

Qualification requirements

HECM for Purchase uses the same eligibility standards as a standard HECM:

• Youngest borrower must be 62+ (55+ for proprietary in California)
• Property must become your primary residence
• Financial assessment — ability to pay property taxes and insurance. See financial assessment guide.
• HUD-approved counseling before closing
• Property must meet FHA or lender eligibility standards

For full qualification details, see who qualifies in California and reverse mortgage requirements.

When purchase makes more sense than refinancing

If you are already planning to move, HECM for Purchase is often cleaner than getting a reverse mortgage on your current home and then selling. Purchase lets you:

• Avoid two sets of closing costs (refinance + buy)
• Skip the stress of owning two properties simultaneously
• Start fresh in a home suited for your next chapter
• Coordinate one move instead of two transactions

If you plan to stay in your current home, a standard HECM or Reverse 2nd may be the better tool. See is a reverse mortgage right for me.

Official references

HUD's HECM for Purchase resources: HUD H4P guidance. CFPB overview: CFPB reverse mortgage basics. According to HUD, every HECM borrower must complete independent, HUD-approved counseling before closing.

Frequently asked questions

Can I use a reverse mortgage to buy a home if I already own one?

Yes. Sell your current home and use the proceeds as the down payment. Many retirees use this to downsize or relocate near family.

Is the process different from a regular reverse mortgage?

Core mechanics are the same — no monthly payments, non-recourse protection, counseling, and financial assessment. The difference is simultaneous purchase closing.

What types of homes can I purchase?

Single-family homes, HUD-approved condos, and certain manufactured homes. Investment and vacation properties are not eligible.

How much down payment do I need?

Typically 45–65% depending on age, value, and rates. Older buyers need less down because their PLF is higher.

Can California homeowners under 62 buy with a reverse mortgage?

HECM requires age 62. Proprietary purchase programs in California are available from age 55.

Next steps

Use the free reverse mortgage calculator to estimate your down payment and proceeds. Take the free readiness assessment or book a strategy call to map your purchase scenario. Visit the contact page or about page to connect with Jay.

This material is not from HUD or FHA and has not been approved by HUD or any government agency. All reverse mortgage loans are subject to credit and property approval. Terms and conditions may apply. This content is for educational purposes only and is not financial, tax, or legal advice.