Key Takeaways
- A HECM for Purchase lets people aged 62 and older buy a primary home with a large down payment and no monthly mortgage payments.
- HECMs can help seniors buy larger homes for multigenerational living, including properties with ADUs or two to four units, while keeping more retirement income available.
- You repay the loan when you sell, move out, or pass away, and heirs never owe more than the home’s value.
Buying a home that fits your whole family, parents, adult children, and maybe grandchildren, often means finding a bigger property with the right layout. For seniors 62 and older, an HECM for Purchase offers a way to buy that multigenerational home with a single down payment and no monthly mortgage payments.
This article explains how the loan works, who can qualify, what types of homes are eligible, and whether it might be a good fit for your family.
In this article (Skip to...)
- HECM for Purchase
- Multigenerational buyers
- How to quallify
- Eligible properties
- Down payment options
- Buying with HECMs
- HECM after death
- FAQs
What is a HECM for Purchase?
A HECM for Purchase lets people 62 and older buy a new primary home, including homes with one to four units for multigenerational living. You make a large down payment, usually between 30% and 65% of the price, based on your age, interest rates, and the home’s value. The reverse mortgage covers the rest.
Unlike a traditional mortgage, you won’t make monthly principal and interest payments while living in the home. Instead, the loan balance grows over time as interest accrues. The loan gets repaid when you sell, move out permanently, or pass away.
For families who want to live together, this type of loan can be a practical choice. You can buy a bigger or more suitable home without monthly mortgage payments, reducing your retirement income.
Why HECM for Purchase works for multigenerational home buyers
No monthly mortgage payments in retirement
A HECM for Purchase means you don’t have to make monthly mortgage payments, so you keep more cash each month in retirement. This extra money can help with healthcare costs, family needs, or unexpected expenses. You still need to pay property taxes, insurance, and maintenance. If you fall behind on these, the loan could go into default.
See if you qualify for a reverse mortgage. Start herePreserve cash and retirement savings
A reverse mortgage for purchase lets you buy a home without spending all your savings at once. This way, you have more cash for emergencies, long-term care, or daily expenses. It’s especially helpful if you’re on a fixed income and want to keep more money available.
Right-size into a home that fits multiple generations
A HECM for Purchase lets you move into a home that fits your needs now, like a single-level layout or extra space for family, without adding a monthly mortgage payment. You can sell your current home and use the proceeds to buy a place that better suits multigenerational living.
If you’re deciding between moving or staying, see our guide to reverse mortgage vs downsizing.
Who qualifies for a HECM for Purchase loan?
Age and borrower requirements
At least one borrower on the loan has to be 62 years of age or older. If you have a younger spouse, they can be listed as a non-borrowing spouse, which provides certain protections allowing them to stay in the home after the borrowing spouse passes away.
See if you qualify for a reverse mortgage. Start hereKeep in mind that the loan amount is based on the youngest borrower’s age. If the youngest borrower is closer to 62, the loan will be smaller, and the down payment will be larger. Adult children or other family members living in the home don’t have to be on the loan.
Residency and occupancy rules for multigenerational homes
You must move into the home as your main residence within 60 days of closing and live there most of the year. Other family members can live with you, but the home must stay your primary residence.
If the last borrower moves out for good, such as to an assisted living facility, the loan must be repaid. Knowing these HECM occupancy rules is important for families planning ahead.
Financial assessment and HUD counseling
Lenders check your finances to make sure you can keep up with costs like property taxes and insurance. They look at your income, assets, and credit history.
Everyone applying for a HECM must complete HUD-approved counseling first. This session is meant to educate you, not stop you. The counselor will explain how reverse mortgages work, your responsibilities, and other options. It’s like getting a second opinion before you decide.
Eligible property types for multigenerational living
Several types of homes qualify for HECM financing and work well for multigenerational living:
- Single-family homes with in-law suites or ADUs: Ideal for multigenerational living and fully eligible. Accessory dwelling units are permitted as long as the entire property meets FHA standards and is appraised as a single property.
- Townhouses and FHA-approved condos: Townhouses qualify if they meet FHA property standards. Condominiums work too, but the condo project has to be on the FHA-approved list or receive a single-unit approval from the lender.
- Manufactured homes on permanent foundations: These are eligible if built after June 15, 1976, are on a permanent foundation you own, and meet other FHA rules. Check if a specific home qualifies early in your search.
- Two-to-four-unit properties: You can buy a duplex, triplex, or four-plex if you live in one unit as your main home. This setup can house an extended family and let you earn rental income from the other units to help with costs like taxes, insurance, and maintenance.
What is the required down payment for HECM for Purchase?
A reverse mortgage purchase requires a larger down payment than a regular mortgage, since you won’t have monthly principal and interest payments. The amount depends on the youngest borrower’s age, current interest rates, and the home’s price or appraised value.
| Borrower Age | Down Payment Required | Loan Amount Available |
| Younger (near 62) | Higher (closer to 55%) | Lower |
| Older (70s-80s+) | Lower (closer to 45%) | Higher |
Older borrowers can get larger loans, so they need a smaller down payment. Younger borrowers, closer to age 62, will need to bring more cash to closing.
See if you qualify for a reverse mortgage. Start hereHECM for Purchase closing costs
Closing costs are much like those for other mortgages and can often be included in the loan, so you pay less out of pocket at closing. Here’s a quick overview; you can also find a full list of HECM fees. Typical costs include:
- Origination fee: What the lender charges for processing the loan
- FHA mortgage insurance premium: An upfront premium paid to FHA, which insures the loan
- Appraisal fee: Cost for an FHA-approved appraiser to assess value and condition
- Title insurance and escrow fees: Costs for ensuring title and managing the closing
- Other third-party fees: Recording, credit reports, and other services
Down payment options for multigenerational buyers
A HECM for Purchase lets you use different sources of money to cover your down payment and closing costs, making it easier to buy a home for your whole family.
- Home sale proceeds: Equity from selling your current home often covers most or all of the required down payment and closing costs.
- Gift funds: Family members, such as adult children, can contribute funds, provided a required gift letter confirms there will be no repayment.
- Personal savings or investments: You can use money from your savings, investments, or retirement accounts, but keep in mind that withdrawals may be subject to tax.
- Seller contributions: Sellers can help pay closing costs within HUD limits, reducing the amount you need to bring to closing. However, these funds can’t be used for the down payment.
How buying a home with a reverse mortgage works
See if you qualify for a reverse mortgage. Start here1. Complete HUD-approved reverse mortgage counseling
This is a mandatory first step before you can apply for the loan. A HUD-approved counselor explains how reverse mortgages work, what your obligations are as a borrower, and what alternatives exist. You’ll receive a counseling certificate to provide to your lender.
2. Get pre-qualified with a HECM for Purchase lender
Contact a lender specializing in HECM for Purchase loans. They’ll conduct a financial assessment, estimate your loan amount, and provide a pre-qualification letter. Getting this before house hunting helps you know your budget and shows sellers you’re a serious buyer.
3. Find and evaluate multigenerational properties
Work with a real estate agent who knows about HECM for Purchase loans. Look for homes with features for multigenerational living, such as in-law suites, easy-access layouts, or several living spaces. New homes are also eligible if they’re finished before closing.
4. Make an offer and complete the appraisal
After you find a home, you’ll make an offer contingent on financing and an appraisal. The lender will order an FHA appraisal to determine the home’s value and ensure it meets HUD’s standards. If the appraisal is lower than the price, you might need to renegotiate or bring more money to closing.
5. Close on your new home
At closing, you’ll sign the final loan papers, pay your down payment and closing costs, and become the owner. This process usually takes 30 to 60 days, much like a regular mortgage.
Pros and cons of buying a home with a reverse mortgage
| Pros | Cons |
| No monthly mortgage payments required | Larger down payment than traditional mortgage |
| Preserve retirement savings and cash flow | Loan balance grows over time |
| Buy a home suited to multigenerational needs | Home has to remain primary residence |
| Non-borrowing family members can live in home | Heirs inherit less equity |
| FHA insurance protects borrower and heirs | Closing costs can be higher |
The main trade-off for multigenerational families is simple: a HECM for Purchase means no monthly payments, but the loan balance grows over time, reducing the equity your heirs will inherit. It’s a good idea to talk this over with your family before deciding.
What happens to the home when the borrower moves or passes away?
When the last surviving borrower permanently moves out or passes away, the loan becomes due. Heirs have several options:
See if you qualify for a reverse mortgage. Start here- Sell the home: Pay off the loan from the sale proceeds and keep any remaining equity.
- Refinance: Get their own mortgage to pay off the reverse mortgage balance and keep the home.
- Pay off the balance: Use other funds to pay off the loan and take ownership.
Because of FHA insurance, this is a non-recourse loan. Heirs will never owe more than the home’s value when it’s sold. If the loan balance is higher than the home’s value, FHA pays the difference.
Deciding if HECM for Purchase is right for your multigenerational family
Before moving forward, consider these questions:
- Do you plan to stay in the home for many years? A HECM works best if you want to age in place, since the upfront costs are high.
- Can you afford the ongoing costs? You’ll need steady finances to pay property taxes, insurance, and maintenance while you have the loan.
- How important is it to leave as much inheritance as possible? The loan balance will grow over time, so your heirs will get less equity.
- Does your family support this choice? Talking openly with your children and other family members can help avoid misunderstandings later.
FAQs about buying a multigenerational home with HECM for Purchase
Time to make a move? Let us find the right mortgage for youUsually, only borrowers aged 62 and older are on the title at closing. Adding others can make things more complicated, so check with your lender about your situation before making any decisions.
This rule allows heirs to pay off the loan by either paying the full balance or 95% of the home’s current appraised value, whichever is less. It protects heirs if the home’s value drops below the loan balance.
Yes, you can use a HECM for Purchase for a new home, as long as it’s fully finished and has a certificate of occupancy before closing. You can’t close on a home that’s still being built.
If all borrowers move out for good, the loan must be repaid. But if an eligible non-borrowing spouse still lives in the home, they may have protections that let them stay. The details depend on when the loan started and if the spouse meets certain rules.
