Special Home Loans for Seniors: HECM, Eligibility, and Costs

Home loans for seniors come in two broad forms: reverse mortgages built specifically for homeowners age 62 and older, and standard government-backed or conventional mortgages that accept Social Security, pensions, and retirement account balances as qualifying income. The federally insured Home Equity Conversion Mortgage is the only loan program written specifically for older homeowners, but FHA, VA, USDA, and conventional loans are all fully available in retirement, and federal law forbids a lender from turning you down because of your age.

You Can’t Be Denied a Loan Because of Your Age

The Equal Credit Opportunity Act prohibits any creditor from discriminating in any part of a credit transaction based on age, provided you have the legal capacity to sign a contract.¹ A lender cannot reject you, charge a higher rate, or offer different terms because you are 70 rather than 40. What a lender can do is evaluate your actual income, assets, credit history, and debt on the same basis it uses for any borrower. That distinction matters, because a 30-year mortgage taken out at 72 is not automatically off the table.

The Home Equity Conversion Mortgage

The Home Equity Conversion Mortgage, commonly called a HECM or reverse mortgage, is the federal loan program built specifically for older homeowners. It lets homeowners age 62 or older convert a portion of their home equity into cash without making monthly principal or interest payments.² The Federal Housing Administration insures the loan, and the insurance carries a non-recourse guarantee: you or your heirs will never owe more than the home is worth when it is sold.

You can take the money as a lump sum at closing, as scheduled monthly payments, as a line of credit you draw against, or as some combination. Interest and insurance are added to the loan balance instead of being paid each month, so the balance grows over time. The loan comes due when the last borrower dies, sells the home, or permanently moves out. While you live in the home, no mortgage payment is required, but you still have to pay property taxes, homeowners insurance, and any HOA fees.

For 2026, the maximum claim amount on an FHA-insured HECM is $1,249,125 nationwide.³ If your home is worth more than that, only the first $1,249,125 of value figures into the loan calculation. Some private lenders offer proprietary reverse mortgages without a federal cap, but those loans are not FHA-insured and terms vary.

What a HECM Costs

Federal rules cap the biggest fees. The upfront mortgage insurance premium is 2 percent of the home’s appraised value or the maximum claim amount, whichever is lower. HUD is authorized to charge up to 3 percent upfront and an ongoing premium at an annual rate of up to 1.50 percent of the outstanding balance,⁴ and currently sets the annual rate at 0.5 percent, which accrues monthly and is added to the balance.

Origination fees are also capped: 2 percent of the first $200,000 of the maximum claim amount plus 1 percent of anything above that, with a floor of $2,500 and a ceiling of $6,000.² Appraisals run roughly $450 to $750, and title insurance and recording fees can generally be financed into the loan rather than paid at closing. Counseling with a HUD-approved counselor is mandatory and typically costs $125 to $250.

Money you receive from a reverse mortgage is not taxable income. The IRS treats these disbursements as loan proceeds rather than earnings, so they do not raise your adjusted gross income or affect income-based benefits.⁵

Using a HECM to Buy a New Home

A HECM for Purchase lets you buy a new primary residence with reverse mortgage financing in a single transaction. You make a large down payment, generally between 45 and 62 percent of the purchase price depending on your age, and the reverse mortgage covers the rest. No monthly mortgage payments are required after closing. The same $1,249,125 cap applies.³ Eligible properties include single-family homes, FHA-approved condos, townhouses, two-to-four-unit owner-occupied buildings, and manufactured homes meeting HUD guidelines. One caution: unlike a HECM refinance, a HECM for Purchase generally has no three-day right of rescission, so the transaction is final at closing unless state law says otherwise.⁶

Standard Mortgages That Work in Retirement

If you want a traditional loan where you make monthly payments, three federal programs work well with retirement income. All of them accept Social Security, pension distributions, disability benefits, and other documented fixed income in place of a paycheck.

FHA loans. Insured by the Federal Housing Administration, these require a down payment of just 3.5 percent. Credit standards are more flexible than on conventional loans, and FHA generally allows a total debt-to-income ratio of up to 43 percent, with exceptions available for borrowers who have strong compensating factors such as significant cash reserves.⁷
VA loans. Available to eligible veterans, active-duty service members, and surviving spouses, VA-guaranteed loans typically require no down payment and carry no monthly mortgage insurance. Both features cut the cost of buying or refinancing in retirement.⁸
USDA loans. The USDA’s rural housing program offers zero-down financing for homes in designated rural areas, covering up to 100 percent of the appraised value. Income limits apply, which many retirees on fixed incomes meet.⁹

Qualifying With Savings Instead of a Paycheck

The biggest hurdle for many retirees is showing enough monthly income after the salary stops. Asset depletion, sometimes called asset dissipation, solves that problem by turning your savings into a monthly income figure for underwriting. Under Fannie Mae’s guidelines, a lender adds up your eligible assets, including retirement accounts, brokerage accounts, and savings, subtracts your down payment and closing costs, and divides the remainder by the loan term, typically 360 months for a 30-year mortgage. The result counts as qualifying income.

Say you have $900,000 in eligible retirement accounts after covering your closing costs. A lender could treat $2,500 a month, or $900,000 divided by 360, as qualifying income. That figure stacks on top of Social Security, pension payments, and any other documented income. Some lenders use a shorter depletion period based on age or overall profile. If you have real savings but modest monthly distributions, asset depletion is often what makes a conventional mortgage possible.

Eligibility at a Glance

Each program has its own rules, but a common thread runs through them: the lender evaluates your finances, not your age.¹

HECM. At least 62 years old, own the home outright or hold significant equity, occupy it as your primary residence, and complete counseling with a HUD-approved counselor before closing. The lender also runs a financial assessment to decide whether you can keep up with property taxes and insurance on your own or whether a portion of the loan proceeds needs to be set aside for those costs.²
FHA, VA, and USDA. No minimum age. You qualify on income, credit, and debt ratios. Social Security, pensions, disability benefits, and investment income all count as long as the income is stable and likely to continue.

What You Still Owe After Closing a Reverse Mortgage

A HECM eliminates monthly principal and interest payments, not every obligation on the property. Federal regulations require HECM borrowers to stay current on property taxes, hazard insurance, flood insurance if applicable, HOA fees, and basic upkeep.¹⁰ Fall behind, and the lender can eventually begin foreclosure.¹¹

To limit this risk, HUD requires the financial assessment at application. If the assessment suggests you may struggle with property charges, the lender can establish a Life Expectancy Set Aside, a portion of your available loan proceeds reserved specifically for future tax and insurance payments.¹⁰ The set-aside lowers the cash you receive up front but works as a safety net. If a default notice arrives, contact a HUD-approved counselor promptly, because options may be available to cure the default before foreclosure starts.

What Happens to Heirs and a Surviving Spouse

When the last HECM borrower dies, the loan becomes due. Heirs receive notice from the servicer and have 30 days to decide whether to buy the home, sell it, or turn it over to the lender, with extensions of up to six months available to complete a sale or arrange financing.¹²

Because HECMs are non-recourse, heirs never owe more than the home’s current appraised value even if the balance has grown larger. To keep the house, heirs pay the lesser of the full loan balance or 95 percent of the home’s current appraised value.⁶ If the home sells for less than the balance, FHA insurance covers the shortfall and heirs are not personally liable.

A spouse listed on the loan as a borrower can stay in the home indefinitely as long as they keep up the property charges. A spouse who was younger than 62 at origination but properly listed as an “eligible non-borrowing spouse” can also remain after the borrowing spouse dies, though they cannot draw any additional loan proceeds. A spouse who was not listed at origination has no such protection and may have to leave when the loan becomes due. This is one of the most consequential decisions in a HECM application, and worth raising directly with your counselor.

Documents and How the Application Works

Whichever program you pursue, the paperwork is similar. Most lenders will ask for:

Income verification: Social Security award letters, pension statements, and the last two years of 1099s to show stable, continuing income.
Asset documentation: recent bank and investment account statements showing liquid savings and retirement balances.
Government-issued photo identification, which for a HECM also confirms age eligibility.
For a HECM, a certificate of completed counseling with a HUD-approved housing counselor before the loan can move forward.²

Applications for all of these programs use the Uniform Residential Loan Application, Form 1003. You can submit through the lender’s portal, in person, or by mail. The lender then orders an appraisal, and the underwriter reviews the full financial picture. Underwriting can take anywhere from a few days to several weeks depending on complexity and how quickly additional documents arrive. For a standard HECM refinance, but not a HECM for Purchase, you have three business days after closing to cancel; during that window no funds are disbursed.⁶

One Note on Ongoing Housing Costs

These loan programs address the mortgage side of homeownership, not the tax side. Many states run property tax deferral or exemption programs for homeowners above a certain age, often 62 to 65, that postpone some or all of your property tax bill until the home is sold. Rules, income limits, and interest on deferred amounts vary by state, so a call to your local tax assessor is the right first step if property taxes are part of the pressure driving your loan decision.

1
Office of the Law Revision Counsel. 15 USC 1691 – Scope of Prohibition
2
Office of the Law Revision Counsel. 12 USC 1715z-20 – Insurance of Home Equity Conversion Mortgages for Elderly Homeowners
3
U.S. Department of Housing and Urban Development. FHA Lenders Single Family
4
eCFR. 24 CFR 206.105 – Amount of MIP
5
Internal Revenue Service. Other
6
U.S. Department of Housing and Urban Development. Handbook 7610.1 – Housing Counseling Program
7
Office of the Law Revision Counsel. 12 USC 1709 – Insurance of Mortgages
8
Veterans Benefits Administration. VA Guaranty
9
Office of the Law Revision Counsel. 42 USC 1472 – Loans for Housing and Buildings on Adequate Farms
10
eCFR. 24 CFR 206.205 – Property Charges
11
Consumer Financial Protection Bureau. What Should I Do if I Have a Reverse Mortgage Loan and I Received a Notice of Default or Foreclosure
12
Consumer Financial Protection Bureau. With a Reverse Mortgage Loan, Can My Heirs Keep or Sell My Home After I Die