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HECM for Purchase: what a buyer's agent needs to know

Tom Jarboe, NMLS #210600
Checked November 3, 2026

Written for real estate agents, planners, CPAs and attorneys. Homeowner or family member? Start with the family guide: The types of reverse mortgages, explained with examples.

Who it fits

Think of a buyer rightsizing or moving near family who doesn't want to pay all cash. It fits when:

• Every borrower is 62 or older, and the home will be their principal residence.
• They have their own funds for the gap, often from selling their current home.
• They can keep paying the new home's taxes, insurance, HOA dues and upkeep (the lender checks).

The family version is in the types of reverse mortgages. Not sure? See is your buyer a fit?

The buyer's own money: what HUD allows

HUD calls the buyer's share the "monetary investment": the gap between the HECM's principal limit and the price, plus loan costs not financed. Earnest money counts toward it. Under 24 CFR 206.44 and HUD Handbook 4000.1, the buyer may use:

• Savings, retirement accounts, stocks and bonds, and cash on hand (deposited and explained).
• Net proceeds from selling their current home.
• A documented gift from an acceptable donor, such as a family member, with a signed gift letter.
• A commission the buyer earns as the agent on the deal, or one a family-member agent gives as a gift.

The buyer may not use sweat equity, trade equity, rent credit or premium pricing, and the lender must document that recent debts weren't borrowed to cover the investment. My advice: no new credit lines or personal loans for this.

Seller credits are narrow. Sellers, agents and builders can contribute only toward origination fees, other closing costs, prepaid items and the upfront mortgage insurance premium, up to HUD's limit (I'll confirm the current limit before you write the offer). Not toward the buyer's share of the price.

Fees the seller pays by law or local custom, and a seller-paid home warranty, sit outside that limit. Lenders can't contribute at all. Every credit goes in the contract and on the settlement statement.

Occupancy and the current home

• Every borrower, and any eligible non-borrowing spouse, must move in within 60 days of closing (24 CFR 206.39).
• A borrower can have only one principal residence. A buyer who already has a HECM on their current home must pay it off at or before the new loan's closing.
• If selling their current home funds the purchase, make the offer contingent on that sale.

Counseling, the 7-day wait and your timeline

The buyer (and any non-borrowing spouse) must meet with an independent HUD-approved counselor. California then adds: the lender can't accept a final application or charge any fee until 7 days after the counseling date on the certificate (Civil Code 1923.2). That includes the appraisal fee.

Here's what I'd do:

1. Have the buyer finish counseling before you write offers. It takes the 7-day clock off the escrow. Counseling certificates expire 180 days after counseling, so don't do it too far ahead.
2. Set loan and appraisal contingencies that allow for the wait, the FHA appraisal and seller repairs.
3. Don't promise a seller a number of days to close.

Also: a purchase loan has no 3-day right to cancel after closing, so the buyer's decision must be settled before signing.

The appraisal, repairs and the contract

The FHA appraisal checks value and condition under HUD's property standards. For a HECM for Purchase:

• The seller must finish required repairs before closing, as HUD's Handbook requires for a purchase. The buyer doesn't own the home yet. A repair set-aside isn't allowed on a purchase.
• The buyer can't order a second appraisal to raise the value or remove required repairs. HUD's review can sometimes require a second appraisal, which adds time.
• Value caps the loan. HUD figures the loan on the lowest of the appraised value, the sales price and HUD's national limit for every HECM.

Contract items HUD requires:

• Only borrowers on the contract. Every purchaser listed must be a borrower, and only borrowers may sign. An adult child can't co-buy.
• The FHA amendatory clause if the buyer hasn't received the appraised value statement before signing.
• A Real Estate Certification signed by buyer, seller and agents, unless the contract says it's the entire agreement.
• The seller must be the owner of record. No assignments, and a home resold 90 days or fewer after the seller bought it isn't eligible (inherited homes are an exception).
• Lead-based paint disclosure for homes built before 1978, and a clause that the seller pays off any PACE lien at or before closing.

Condos and new construction

Condos. The unit must be in an FHA-approved project, qualify as a site condo, or get Single-Unit Approval. Single-Unit Approval is tighter: at least five units, the unit's certificate of occupancy at least a year old or the unit previously occupied, and the buyer must meet HUD's residual income standard without exceptions.

A brand-new unit in an unapproved project won't qualify. Check HUD's condo lookup before you write, and see which homes qualify.

New construction. The home must be fully complete before closing. If it's never been occupied and the certificate of occupancy is less than a year old, the lender needs a copy of it, the required inspections and the builder's HUD forms (92541 and 92544). Ask the builder early.

When it's not a fit, or what can go wrong

• The buyer's funds are borrowed, or a younger co-buyer needs to be on the contract.
• The condo isn't approved and fails Single-Unit Approval.
• The seller won't do the repairs the appraisal calls for.
• The buyer can't move in within 60 days, or wants a second home or rental.
• The buyer plans to move again soon, or wants to leave the home itself to heirs. The balance grows over time with interest, mortgage insurance and fees, so there's usually less equity left.

The loan is non-recourse: the buyer and heirs never owe more than the home is worth when it's sold.

Checklist for the buyer's agent

• Confirm every buyer is 62 or older and the home will be their main home.
• Talk with a lender before writing offers.
• Get counseling done, and the 7-day wait running, before you go under contract.
• Document the buyer's funds: statements, sale of the current home, or a gift letter. No borrowed money.
• Keep seller credits to allowed costs and write them into the contract.
• List only the borrowers as buyers. Add the FHA amendatory clause and Real Estate Certification.
• Check condo approval, or Single-Unit Approval eligibility, before you write.
• Set contingencies that allow for the wait, appraisal and repairs.
• Remind the buyer: move in within 60 days, and keep paying taxes, insurance, HOA dues and upkeep.

What makes a seller's agent take the offer seriously

Send proof of the buyer's own funds, a note from the lender explaining the program and its steps (not an approval), a realistic timeline with counseling already done, and a note on how repairs will be handled.

If the seller's agent hasn't seen a HECM for Purchase, explain it's an FHA-insured loan with set rules, and the buyer has already finished the required counseling. Listing a home that has a reverse mortgage? See selling a home with a reverse mortgage.

Working with me

Call me at (909) 869-6588 or email [email protected], and your buyer is welcome to call me directly. HECM for Purchase isn't offered everywhere. I can offer it, through New American Funding, so bring me in early. I'll go over the costs first and say plainly when it isn't a fit.

Counseling with an independent HUD-approved counselor is required before applying, and California adds a 7-day wait before a final application or any fees.

This page is education only. I don't pay or accept referral fees or anything of value for referrals, and your clients are always free to choose any lender.

Tom Jarboe, Regional Sales Manager, New American Funding, NMLS #210600, Diamond Bar.

Have a client weighing a reverse mortgage? Call or email me: (909) 869-6588. More for professionals.

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