By Dusty Lloyd, Mortgage Broker, Promise Home Loans
Just this year I helped a Mission Viejo couple sell their two-story home and close on a single-level place in a 55+ community in Rancho Mission Viejo — with no monthly mortgage payment. It's the same move most South Orange County retirees want: the family home too big, the stairs harder, the yard a weekend job. But downsizing usually feels like a trade-off with no good options.
Pay cash for the next home, and you tie up most of your sale proceeds. Take out a traditional mortgage, and you're signing up for a monthly payment in retirement. There's a third option, and most people have never heard of it: the HECM for Purchase.
What is a HECM for Purchase?
It's a reverse mortgage used to buy a home instead of borrowing against one you already own. FHA created it in 2009. It lets buyers 62 and older purchase their next home with one transaction and no required monthly mortgage payment.
You make a sizable down payment, typically from the sale of your current home. The reverse mortgage covers the rest. You still pay property taxes, insurance, HOA dues, and upkeep, as with any home.
How it works: an illustrative example
Numbers are rounded and for illustration only. Actual amounts depend on age, interest rates, and the purchase price.
Barbara and Jim, both 70, sell their two-story home for $1.6 million. They want a single-level home in a 55+ community priced at $1 million.
Option A: pay cash. They spend $1 million and keep about $600,000.
Option B: traditional mortgage. They put 20% down, keep more cash, but take on a monthly mortgage payment for decades.
Option C: HECM for Purchase. They put down roughly 55–65%, about $550,000–$650,000, and the reverse mortgage covers the rest. They keep roughly $950,000–$1.05 million of their sale proceeds, with no required monthly mortgage payment.
With Option C, the extra $350,000–$450,000 can stay invested, fund travel, cover care, or be gifted to family now. You can't spend home equity, but you can access most investments.
Who it's a good fit for
Buyers 62+ moving to a home better suited to aging: single-level, closer to family, lower maintenance
People who want to keep more of their sale proceeds working for them
Retirees whose income makes a traditional mortgage payment uncomfortable
Buyers relocating to be near grandchildren
What to know before you shop
The down payment must come from your own funds, such as home sale proceeds, savings, or investments. It can't be borrowed.
The new home must be your primary residence, and you need to move in within 60 days of closing.
Eligible properties include single-family homes, 2–4 unit homes you live in, FHA-approved condos, and some manufactured homes. New construction needs a certificate of occupancy. Many 55+ communities are condos, so the project needs FHA approval or a single-unit approval. Check this before you make an offer.
Counseling is required. You'll complete a session with a HUD-approved counselor before applying.
Your agent matters. Work with a real estate agent who has closed HECM for Purchase deals. Seller concessions are generally not allowed beyond customary fees, so the offer needs to be written with that in mind.
Higher-priced homes may need a jumbo product. FHA counts value up to $1,249,125 in 2026. For pricier homes, a proprietary reverse purchase loan may fit better.
The bottom line
Downsizing should make retirement easier, not tie up your wealth or add a mortgage payment. A HECM for Purchase lets you right-size your home and keep more of your equity working for you.
If you're thinking about selling in the next year or two, now is the time to run the numbers, before you list.
See how much home you can buy with no monthly mortgage payment, call me 949-371-5363 or schedule online
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