Reverse Mortgage For Purchase Loan (H4P)

Yes. Eligible borrowers may use a Home Equity Conversion Mortgage for Purchase (H4P) to buy a new primary residence. Typically, the borrower provides a down payment—often in the range of about 45% -65%* of the purchase price—from their own funds, while the remaining portion is financed through the H4P loan.

*The required down payment on your new home is determined on a number of factors, including your age (or eligible non-borrowing spouse’s age, if applicable); current interest rates; and the lesser of the home’s appraised value or purchase price.

They are closely related but used in different situations. A traditional reverse mortgage (HECM) allows homeowners to borrow against the equity in a home they already own. A HECM for Purchase (H4P), on the other hand, is used to buy a new primary residence using a combination of the borrower’s funds and the loan proceeds. Once the loan is in place, the features and protections of the two programs are generally similar.

A HECM for Purchase may help some homebuyers age 62 or older expand their purchasing power when buying a home that better fits their needs in retirement. As each borrower’s financial situation and goals are different, speaking with a reverse mortgage professional can help determine whether this type of financing may be appropriate for your circumstances.

The HECM for Purchase program allows eligible borrowers to purchase a new primary residence using a combination of their own funds and proceeds from the loan. Depending on eligibility factors, borrowers may contribute roughly 30%-70% percent* of the purchase price as a down payment, with the remainder funded through the H4P loan.

Although the loan is secured by the home, monthly principal and interest payments are generally not required as long as the borrower continues to meet the loan obligations. These include living in the home as a primary residence, maintaining the property, and staying current on property taxes and homeowners insurance.

*The required down payment on your new home is determined on a number of factors, including your age (or eligible non-borrowing spouse’s age, if applicable); current interest rates; and the lesser of the home’s appraised value or purchase price.

Like a traditional mortgage, the HECM for Purchase loan is secured by a lien on the property, but the homeowner continues to hold title to the home throughout the life of the loan.

Yes. Borrowers may choose to make voluntary payments toward the loan balance at any time. In some situations, there may be tax considerations* associated with making payments.

*This content does not constitute tax advice. Please consult a tax advisor regarding your specific situation.

Yes. The sales contract must be signed more than 90 days from the seller’s purchase of the property.

Yes. HECM for Purchase loans include both upfront and ongoing mortgage insurance premiums (MIP). These costs are typically financed into the loan rather than paid out of pocket.

Mortgage insurance supports several features of the program, including the non-recourse protection, which ensures that neither the borrower nor their heirs are responsible if the loan balance exceeds the home’s value when the loan becomes due.

Yes. Borrowers may begin the application process before construction is finished. However, the appraisal and loan closing cannot occur until a Certificate of Occupancy has been issued for the property.

Funds for the purchase must come from the borrower’s verified liquid assets, such as bank accounts, certificates of deposit, retirement accounts, or proceeds from the documented sale of other assets (for example, the sale of a current home).

The down payment requirement for a HECM for Purchase is typically higher because the loan structure does not require monthly principal and interest payments, provided the borrower meets the loan obligations (home must be primary residence, must pay homeowners insurance, property taxes, and maintenance costs, etc.). In contrast, traditional mortgages often allow lower down payments but require regular monthly payments over the life of the loan.