Can I Buy a House with a Reverse Mortgage: Cash, Costs, Heirs

Yes, you can buy a house with a reverse mortgage through the FHA’s Home Equity Conversion Mortgage for Purchase program, which lets a buyer 62 or older combine a large cash down payment with reverse mortgage proceeds to acquire a primary residence and carry no monthly mortgage payment for the life of the loan.¹ The cash you need at closing usually falls between 45 and 62 percent of the purchase price, and the loan covers the rest. You still owe property taxes, insurance, and upkeep, and the balance grows over time instead of shrinking.

Who Qualifies and What You Can Buy

Federal law defines the borrower as an “elderly homeowner,” which means someone at least 62 years old, or someone whose spouse is at least 62.² A married couple buying together can list a younger spouse as an Eligible Non-Borrowing Spouse rather than a co-borrower, which matters later. The home has to be your primary residence, meaning you live there most of the year.³

Eligible properties include single-family homes and two-to-four-unit buildings where you occupy one unit. Manufactured homes qualify if they were built after June 15, 1976, and sit permanently attached to a foundation that meets HUD guidelines. Condominiums must be on the FHA-approved list or clear a spot-approval process that evaluates the HOA’s financial health. Any property must also meet FHA minimum property standards for structural soundness, safety, and working utilities.⁴

How Much You’ll Need to Bring in Cash

A HECM only covers part of the purchase price. You bring the difference. Three inputs decide how much reverse mortgage money is available: the age of the youngest borrower or non-borrowing spouse, the expected interest rate when you apply, and the appraised value of the home or the FHA lending cap, whichever is lower. For 2026, the national HECM lending limit is $1,249,125, and the same figure applies everywhere, including Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

Older borrowers unlock a larger share of the home’s value, and lower expected rates do the same because the balance grows more slowly. Higher rates and younger borrowers push the required cash contribution up. That is the opposite of how a conventional mortgage responds to rate changes, where the rate moves your monthly payment rather than the amount you can borrow.

Historically, HUD only allowed the down payment to come from personal savings, liquidated investments, or the sale of a prior home. Borrowing the down payment through credit cards, personal loans, or any other secondary debt is still off-limits. A 2023 Federal Register notice widened the list to also accept gifts from family or other parties, employer assistance programs, disaster relief grants, and lender premium pricing credits.¹ The gift provision is what lets adult children help fund a parent’s purchase.

Sellers can chip in on closing costs, but only for items that are customary in the local market or required by state or local law, plus the cost of a home warranty.⁵ Seller concessions cannot be used toward your required down payment.

Costs Rolled Into the Loan

Most HECM for Purchase costs get financed into the loan balance rather than paid in cash, but each one still reduces your equity from day one.

Upfront mortgage insurance premium of 2 percent of the home’s appraised value or the FHA lending limit, whichever is lower. On a $400,000 home, that is $8,000.
Annual mortgage insurance premium of 0.5 percent of the outstanding balance, charged monthly and added to what you owe. It compounds, because interest later accrues on the enlarged balance.
Origination fee of the greater of $2,500 or 2 percent of the first $200,000 of the maximum claim amount plus 1 percent of anything above $200,000, capped at $6,000 and financeable into the loan.⁵
Third-party settlement costs such as title insurance, appraisal, and recording fees, which vary by location and are comparable to any home purchase.

The upfront premium and origination fee together can run $10,000 to $18,000 on a mid-priced home. Financing them means your starting balance is already higher than the price paid to the seller.

Ongoing Responsibilities After Closing

Zero monthly mortgage payments does not mean zero housing bills. You have to keep current on property taxes, homeowners insurance, flood insurance where required, and any HOA dues, and you have to maintain the home.⁵ Falling behind on any of those can make the entire loan due and payable.

Before approving the loan, the lender runs a financial assessment covering credit history, cash flow, and residual income to judge whether you can carry those expenses over time.⁶ If the numbers look thin, the lender will require a Life Expectancy Set-Aside, which reserves part of your loan proceeds to cover future taxes and insurance.⁷ The set-aside shrinks the cash you have available for the down payment, so you may need to bring more money to closing or shop at a lower price point.

Counseling and the Steps to Close

You cannot formally apply until you complete a session with a HUD-approved counselor. The counselor walks through how the loan works, what it costs, what triggers repayment, how it affects your estate, and what alternatives exist. HUD does not cap the fee, but agencies must set reasonable rates and must waive the fee for anyone whose income falls below 200 percent of the federal poverty level. The certificate you receive, Form HUD-92902, is what your lender needs to open the file.⁸ It expires 180 days after the session date, so time the counseling to your search.

From there the transaction looks like a hybrid of a conventional purchase and an FHA loan:

Complete counseling and hold onto your HUD-92902.
Find a property, negotiate a purchase contract, and warn the seller that HECM closings run longer than conventional ones.
Apply with an FHA-approved lender, submitting the counseling certificate, income documentation, and asset verification.
Wait for the FHA appraisal, which sets market value and confirms the home meets health and safety standards. Any required repairs must be done before closing.
Move through underwriting, where the lender finalizes the financial assessment, calculates the principal limit, and decides whether a Life Expectancy Set-Aside applies.
Close, combining your cash and the reverse mortgage proceeds to pay the seller, with the upfront premium and origination fee typically financed in.

Expect 45 to 60 days from application to closing, longer if repairs or title issues surface. After signing, you move in with no monthly mortgage payment.

Fixed vs. Adjustable Rate for a Purchase

Two structures are available, and the choice matters more than it looks. A fixed-rate HECM locks the rate for life but forces a single lump-sum disbursement at closing. That works cleanly for a purchase because the money flows straight to the seller, but any unused portion of your principal limit disappears.

An adjustable-rate HECM permits a lump sum plus a line of credit, monthly advances, or a mix. The interest rate moves with market indexes while the mortgage margin stays fixed for the life of the loan. For a purchase, the adjustable option lets you hold some capacity in reserve as a credit line for future needs, and the unused portion of that line grows over time at a rate tied to the loan.

When the Loan Comes Due

A HECM has no fixed maturity date. Specific events instead trigger repayment:

The last surviving borrower dies and no eligible non-borrowing spouse remains in the home.
You move out, and the home stops being your primary residence for any reason other than a temporary medical stay.
You are away for medical reasons for more than 12 consecutive months and no other borrower lives in the home. HUD treats a health care facility stay as temporary only up to that 12-month mark.⁵
You fail to pay property taxes, insurance, or HOA fees, or you let the property deteriorate and don’t cure the default after notice.
You sell or transfer title and no other borrower keeps ownership.

The 12-month medical rule catches people out. A borrower who enters assisted living expecting to return home may not realize the clock is already running. A co-borrower who continues to live in the property keeps the loan in place regardless of the other borrower’s absence or death.

The loan is also non-recourse. Neither you nor your heirs will owe more than the home’s appraised value when the loan becomes due, even if the balance has grown past the home’s worth. The mortgage insurance premiums you pay fund that protection.⁹

Protecting a Younger Spouse

If your spouse is under 62 and named as an Eligible Non-Borrowing Spouse in the loan documents at closing, HUD allows a deferral period that postpones the loan’s due-and-payable status after the borrowing spouse dies or permanently moves out. The surviving spouse can stay in the home without repaying, as long as they continue to live there as their primary residence, keep paying taxes and insurance, and maintain the property.¹⁰

The qualifying facts have to be true at loan origination. The spouse must have been married to the borrower at closing, disclosed to the lender, and named in the loan documents. A spouse who wasn’t disclosed at origination cannot become eligible later, even by marrying the borrower after closing. Within 90 days of the borrower’s death, the surviving spouse must also establish a legal ownership interest or another legal right to stay in the property for life.¹⁰

A spouse who does not qualify faces a much harder outcome. If the borrowing spouse dies and the surviving spouse is ineligible, the loan becomes due immediately, and the survivor would need to pay off the full balance through refinancing or other funds to stay.¹¹ Getting this designation right at closing is one of the most consequential decisions in the entire transaction.

What This Means for Your Heirs

When the last surviving borrower dies and no eligible non-borrowing spouse is living in the home, the lender sends a due-and-payable notice to the heirs. They have 30 days to decide whether to buy, sell, or surrender the home to satisfy the debt, and that window can be extended up to six months if they are actively selling or arranging financing.⁹

Heirs have three options. They can pay off the balance in full and keep the home, which pencils out when the home is worth more than the debt. They can sell and keep any equity that remains after payoff. Or, if the balance exceeds the home’s current value, they can sell for at least 95 percent of the appraised value and let FHA insurance cover the shortfall.⁹ Heirs are never personally liable for anything above what the home sells for. Talking with them about the loan while you’re alive spares them from learning the timelines during probate.

1
Federal Register. Federal Housing Administration (FHA) HECM for Purchase – Acceptable Monetary Investment Funding Sources and Interested Party Contributions
2
Office of the Law Revision Counsel. 12 USC 1715z-20 – Insurance of Home Equity Conversion Mortgages
3
Consumer Financial Protection Bureau. Can Anyone Take Out a Reverse Mortgage Loan?
4
eCFR. 24 CFR Part 200 – Introduction to FHA Programs
5
eCFR. 24 CFR Part 206 – Home Equity Conversion Mortgage Insurance
6
Federal Register. Federal Housing Administration – Strengthening the Home Equity Conversion Mortgage Program
7
Department of Housing and Urban Development. HECM Financial Assessment – Case Processing Overview
8
Department of Housing and Urban Development. Certificate of HECM Counseling
9
Consumer Financial Protection Bureau. With a Reverse Mortgage Loan, Can My Heirs Keep or Sell My Home After I Die?
10
eCFR. 24 CFR 206.55 – Deferral of Due and Payable Status for Eligible Non-Borrowing Spouses
11
Consumer Financial Protection Bureau. Does Having a Reverse Mortgage Impact Who Can Live in My Home?