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If your elderly parents don’t qualify for a mortgage loan, you may be considering purchasing a home on their behalf. The good news: There’s help for this situation from the Family Opportunity Mortgage by Fannie Mae. Is it right for you? Let’s give it a closer look.
What Is the Family Opportunity Mortgage?
Fannie Mae includes a clause in its guidelines that allow borrowers to purchase a second home that can be used by loved ones. Under this clause, the borrower doesn’t have to meet higher down payments and interest rates normally associated with non-owner-occupied properties.
How Can You Secure a Family Opportunity Mortgage?
Just like a conventional loan mortgage process, the Family Opportunity Mortgage requires borrowers to meet certain criteria that establishes their creditworthiness, like:
- Credit score: 620 or above
- Down payment: 5%
- Debt-to-income (DTI) ratio: 45%
- Employment: Proof of steady employment
- Income: Proof of being able to afford the new monthly mortgage payment in addition to the borrower’s other payment obligations
The guideline also includes requirements on the types of property that are acceptable for this type of mortgage. It must be a single-unit dwelling that can be occupied all year.
How Can You Qualify for a Family Opportunity Mortgage?
Some of the additional requirements for securing this type of mortgage are:
- Proof of relationship (that they are, in fact, your parents, for example)
- Proof that parents are not able to work or otherwise afford to finance their property
- Proof of your parents’ income (including social security benefits)
- A letter of intent that explains you are purchasing the property for your elderly parents to live in
- Proof of residency: The elderly parents cannot have owned a home for three years prior to the closing date.
What Are the Benefits of a Family Opportunity Mortgage?
Being able to secure a safe, comfortable home for your aging parents may seem like benefit enough. However, there are multiple financial advantages for borrowers who qualify for a Family Opportunity Mortgage.
- Lower down payment
Second homes typically require a larger amount down. Depending on your specific situation, you may even be eligible for down payment assistance. - Lower interest rates
Higher interest rates are usually required for non-owner-occupied properties. The Family Opportunity Mortgage keeps you from dealing with that, which can save you thousands of dollars on your payments. - No distance requirements
Even if your elderly parents live a state away, or even across the country, you can still take advantage of a Family Opportunity Mortgage.
Taking care of aging parents can be challenging, and making sure they have a comfortable home can go a long way toward alleviating the stress. The Family Opportunity Mortgage may be the solution for providing them with a good place to live without causing an unnecessary financial burden on you.
Planning to purchase or refinance a property? Contact MIG today to explore your mortgage loan options.
*Terms based on: Conventional fixed first lien. 95% LTV. 6.75% Interest Rate. 8.126% APR. $142,500 Loan Amount with 360 monthly repayment of $924.25 per month. 700 Credit Score. Disclosed payment does not include PMI, taxes, insurance, or HOA fees. Rates as of June 14, 2023.
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