Down Payments and Reverse Mortgages: What You Need to Know
Down payments go hand-in-hand with mortgage loans. All FHA loans require at least 3.5% of the home’s value as a down payment, and some require 10% down if your credit is very low. However, the one exception is the standard HECM reverse mortgage. In this situation, you do not need any sort of down payment. This is because your loan is based on the existing equity in your home and the loan is secured by your home.
However, if you are thinking about applying for a HECM for purchase, then you will need to worry about a down payment. In this situation, you will need between 42% and 62% (depending on your age) of the new home’s value as a down payment. The remainder of the amount will be covered by your reverse mortgage.