HECM for Purchase 2026: Closing Costs, Down Payment, and How It Works
A HECM for Purchase lets a buyer 62 or older buy a home with a reverse mortgage, putting down a larger down payment and then never making a monthly mortgage payment on the new home. It is one of the best tools for right-sizing in retirement, and one of the least understood. The most common questions I get are about cost: how much you have to put down, what the closing costs are, and who can pay them. Here is the full picture for 2026.
Quick answer
With a HECM for Purchase, the reverse mortgage covers part of the price and you pay the rest as a down payment, typically about 45% to 65% of the price depending on your age and interest rates. Closing costs include the 2% FHA upfront mortgage insurance premium, an origination fee capped by HUD at $6,000, and normal title, escrow, appraisal, and counseling costs; most of the loan-side costs are paid from the loan itself. Since HUD's 2024 update, the seller, real estate agent, builder, or developer can contribute toward your closing costs, but not toward the down payment. You must move in within 60 days.
How a HECM for Purchase works
Instead of buying a home with cash, or buying with a regular mortgage and a monthly payment, you combine two sources at closing:
- Your down payment, typically from the sale of your current home, savings, or retirement funds.
- The HECM loan, which covers the rest of the price and the loan's own closing costs.
After closing you own the home, you have no required monthly mortgage payment, and you pay property taxes, insurance, HOA dues, and upkeep as with any home. The loan is repaid when the last borrower sells, moves out, or passes away, and FHA insurance means you or your heirs never owe more than the home is worth at sale.
How much is the down payment?
The down payment is whatever is left after the HECM's principal limit, which is set by the youngest borrower's age, the expected interest rate, and the lesser of the price, the appraised value, or the 2026 HECM limit of $1,249,125. Older buyers put down less.
| Youngest buyer's age | Example down payment (share of price) |
|---|---|
| 62 | About 60% to 65% |
| 70 | About 55% to 60% |
| 75 | About 50% to 55% |
| 80 | About 45% to 50% |
Examples assume an expected rate near 6% and include loan closing costs paid from the loan. Rates change daily, so treat these as ranges, not a quote.
Acceptable down payment sources include proceeds from selling your current home, savings, and retirement or investment accounts. The down payment cannot come from a seller credit, lender credit, bridge loan, credit card, or seller financing. If you plan to use any other source, confirm it before you make an offer.
HECM for Purchase closing costs, line by line
| Cost | How it is figured | Typical amount |
|---|---|---|
| FHA upfront mortgage insurance (MIP) | 2% of the lesser of price, appraised value, or $1,249,125 | $12,000 on a $600,000 home |
| Origination fee | 2% of the first $200,000 and 1% above, capped by HUD at $6,000 (minimum $2,500) | $2,500 to $6,000 |
| Appraisal | FHA appraisal of the new home | Several hundred dollars and up, higher on larger homes |
| HUD counseling | Required session before you apply | Often around $125 to $200; sometimes free |
| Title, escrow, recording, credit report | Set by title and escrow providers and your county | Varies by state and price |
| Normal buyer costs | Owner's title policy (where the buyer pays), tax and HOA prorations, inspections | Same as any purchase |
| Annual MIP | 0.5% a year on the balance, added to the loan | Not paid out of pocket |
The MIP and origination fee are usually paid from the HECM itself, which is why they show up as a slightly larger down payment rather than a separate check. For more on each line item, see Reverse Mortgage Closing Costs in 2026 and HECM MIP Explained.
Example: 70-year-old buying a $600,000 home
HECM principal limit: about 44% of $600,000 = $264,000 (illustrative).
Loan closing costs paid from the HECM: 2% MIP ($12,000) + origination ($6,000) + other loan-side costs (about $3,500) = about $21,500.
HECM funds toward the price: $264,000 minus $21,500 = $242,500.
Your down payment: $600,000 minus $242,500 = about $357,500 (about 60%), plus normal buyer costs such as prorations.
Monthly mortgage payment afterward: none required. An example, not a quote.
Can the seller or agent pay my closing costs?
Yes, within limits. Under HUD Mortgagee Letter 2024-06, effective April 29, 2024, the seller, real estate agent, builder, or developer can contribute toward a HECM for Purchase buyer's closing costs. These contributions cannot be used toward the down payment, and the lender or loan originator cannot make them. Discount points, rate buydowns, and premium pricing are not allowed as contributions. Negotiate any credit into the purchase contract early so the lender can review it.
Property and occupancy rules
- Move in within 60 days of closing. It must be your primary residence; no rent-back to the seller.
- Eligible homes: single-family, 2-4 units (you live in one), FHA-approved condos, and manufactured homes that meet FHA standards.
- New construction: you can apply early, but the appraisal and closing wait for the certificate of occupancy.
- Counseling first: complete HUD-approved counseling before applying.
- Financial assessment: the lender checks credit history and residual income to confirm you can keep up with taxes, insurance, and HOA dues.
If the home you want is above the HECM limit or is a condo without FHA approval, a jumbo reverse mortgage for purchase may be an option. See Jumbo Reverse Mortgage Requirements 2026.
Tips before you make an offer
- Get your down payment figure first. Ask for a HECM for Purchase estimate at your target price before you tour homes.
- Tell your real estate agent up front. Agents unfamiliar with the program sometimes worry about timelines. A well-prepared file closes on a normal schedule.
- Plan the sale of your current home. If sale proceeds are your down payment, line up the timing, since bridge loans cannot be used.
- Ask about seller credits for closing costs as part of your offer.
Buying in Orange County? See our local guide: Buying an OC Home With a HECM for Purchase.
Frequently asked questions
What are the closing costs on a HECM for Purchase?
The main costs are the FHA upfront mortgage insurance premium of 2% of the lesser of the price, appraised value, or the 2026 limit of $1,249,125; an origination fee capped by HUD at $6,000; and third-party costs such as the appraisal, HUD counseling, title, escrow, and recording. You also pay normal buyer costs like prorations. The loan-side costs are usually paid from the HECM itself.
How much is the down payment on a HECM for Purchase?
It depends on the youngest buyer's age and interest rates. As an example at an expected rate near 6%, a 62-year-old might put down about 60% to 65% of the price and an 80-year-old about 45% to 50%. Get an estimate at your target price before you make an offer.
Can the seller pay closing costs on a HECM for Purchase?
Yes. Since HUD Mortgagee Letter 2024-06 (effective April 29, 2024), the seller, real estate agent, builder, or developer can contribute toward the buyer's closing costs. The contribution cannot go toward the down payment, and lenders and loan originators cannot make these contributions.
Where can the down payment come from?
Typical sources are proceeds from selling your current home, savings, and retirement or investment accounts. Seller credits, lender credits, bridge loans, credit cards, and seller financing cannot be used for the down payment.
How soon do I have to move in after a HECM for Purchase?
You must occupy the home as your primary residence within 60 days of closing.
Can I use a HECM for Purchase on a condo?
Yes, if the condo project is FHA-approved. For a condo without FHA approval or a home above the HECM limit, some jumbo reverse mortgage programs offer a purchase option.
Know your down payment before you shop
Free 15-minute call. Give me your target price and ages, and I will estimate your down payment and closing costs.