Purchase Reverse Mortgages
At Crestico, we’re more than just a mortgage brokerage—we’re your strategic partner in making homeownership simpler and more accessible.
Check Eligibility
Payment Option
Get Approved
Close the Loan
Repayment & Loan Terms
The main requirement for a reverse mortgage purchase is that the property must become your primary residence. Since there are no monthly payments for principal or interest, the loan balance gradually increases over time as interest accumulates. This type of loan is particularly helpful for seniors looking to downsize or relocate, as it allows them to tap into their home’s equity to finance their new home without the burden of traditional mortgage payments.
Who Should Consider Using a HECM for Purchase Loan?
We believe a reverse mortgage purchase loan can be a valuable financial tool for a wide range of older Americans who are able to make a down payment of approximately 50-60%. One group of potential borrowers includes those considering a conventional mortgage to finance their home purchase, but who may find that a conventional loan isn't ideal for their financial situation. This can include individuals who:
- Have limited cash for a down payment and would struggle with the monthly payments of a traditional mortgage.
- Do not qualify for a conventional loan due to high debt-to-income ratios.
- Have credit issues that make them ineligible for a conventional mortgage but may still qualify for a reverse mortgage.
Another group that may benefit from a reverse mortgage purchase includes those who are thinking about buying a home with all cash. While paying in full may seem like a viable option, it could deplete their savings, leaving them with limited financial flexibility. Instead of spending all their available funds on the home, it might be wiser to finance half of the purchase price and retain the rest in more liquid or semi-liquid financial assets that align with their risk tolerance. This approach can help seniors avoid the situation where they spend all their savings and end up with limited borrowing power, especially if they are on a fixed income and find themselves single or widowed later on.
How Do I Know If I Qualify?
How Much Do I Have To Put Down?
Typically, the downpayment required is around 50-60% of the purchase price, so those looking to contribute less would be better suited for a different mortgage option. The older the borrower, the more they can qualify to borrow. In the case of a married couple, the younger spouse’s age is used due to their longer life expectancy.
What Kind of Properties Are Eligible?
Eligible property types for a reverse mortgage purchase include:
- 1-4 unit homes
- Townhomes
- FHA-approved condos
- Manufactured homes that meet HUD’s guidelines
Ineligible property types are:
- Co-op units
- Condos that are not FHA-approved
- Manufactured homes on leased land
- Unique homes, such as berm, geodesic, Indian tribal land, or log homes without comparable properties
When it comes to new construction, you can purchase a spec home from a builder using a reverse mortgage, with a significant earnest money deposit required to customize finishes. However, if you want to buy a lot and hire your own builder, that would require a construction loan. After the property is completed, you can then use a reverse mortgage to pay off the construction loan (ensuring the borrowed amount is sufficient to cover the loan).
Regardless of the property type, it must meet FHA minimum property standards before the loan can close. The appraiser will identify any necessary repairs, which typically need to be made by the seller before closing. As a result, purchasing a home as-is that requires rehabilitation can be challenging.
Additionally, homes purchased and resold within the last three months are not eligible for an FHA loan. If the sale occurs between three to six months, the price increase cannot exceed 100%. There are exceptions to these rules, so feel free to reach out for assistance with specific scenarios.
Where Can The Down Payment Funds Come From?
If you're using your own assets, be aware that we will need at least 60 days of complete bank statements showing the funds in your account during that period. If there are any large deposits within those 60 days, we’ll need to verify the source of those funds. Gift funds from friends or family are allowed, but just like your own funds, they will need to be properly documented. This requirement ensures the funds are not borrowed and helps us comply with federal anti-money laundering regulations.
What Are The Closing Costs?
It’s important to note that HUD does not permit seller concessions with HECM for purchase loans. Sellers are only allowed to cover the closing costs typically paid by the seller in the county where you're purchasing. This can vary depending on the location. Therefore, it’s better to negotiate the purchase price rather than rely on seller concessions. Additionally, things like furniture or a golf membership cannot be included in the purchase price.
What Are The Next Steps?
Reach out for a proposal to determine how much you can afford based on the expected proceeds from the sale of your home. If you don’t intend to use the entire amount or have a specific purchase price in mind, feel free to share that with us. If the terms align with your needs, we’ll assist you with getting prequalified for the loan, which includes documenting your income, assets, and pulling your credit. Next, you’ll need to complete mandatory reverse mortgage counseling with a HUD-approved counselor. Once that’s done, decide on the property you want to purchase and the amount you’re willing to offer. If you’re prequalified, we’ll provide a prequalification letter for your offer. Once you're under contract, we’ll proceed with the standard reverse mortgage process, which typically takes around 30 days (though we can expedite this if necessary).