Family Opportunity Mortgage: A Tool to Help Aging Parents or Disabled Children Become Homeowners

The dream of homeownership should not be bound by age or ability, but for individuals who are unable to meet mortgage approval guidelines, it can sometimes be difficult to make that dream a reality. Fortunately, there are programs that make homeownership more accessible for more people. One example is the Family Opportunity Mortgage Program that individuals can utilize to purchase a home for their aging parents or disabled children.

What is a Family Opportunity Mortgage?

The Family Opportunity Mortgage used to be a formal program under Fannie Mae and Freddie Mac (government sponsored enterprises who guarantee most U.S. mortgages). The formal program was dissolved but has since evolved into a conventional loan with special guidelines and is still under Fannie and Freddie. In this article, we will continue to refer to the conventional loan guidelines as a Family Opportunity Mortgage.

Simply put, a Family Opportunity Mortgage allows an individual to purchase a home in which an aging parent or disabled child will live. The borrower may finance the home as a primary residence even though the borrower will not reside in the home.

Why is Financing a Family Opportunity Mortgage as a Primary Residence Beneficial?

When applying for a mortgage, you must indicate the intended occupancy type on the application for underwriting purposes. There are three main occupancy types – Primary Residence, Secondary Residence, and Investment Property. A Primary Residence (also referred to as Principal or Owner-occupied) is one in which you intend to live most of the time (at least six months per year). A Secondary Residence is usually purchased and occupied for a portion of the year (think vacation home) and typically must be 50 to 100 miles away from the borrower’s primary residence, although there are some exceptions. An Investment Property is real estate that is purchased with the intent of making a profit through renting and/or future resale (i.e. a duplex home you intend to rent to others).

A mortgage for a Primary Residence is viewed as less risky than a mortgage for a Secondary Residence or Investment Property because borrowers tend to make payments on their primary residence first in the event of financial hardship. Therefore, lenders tend to offer lower interest rates and have lower down payment requirements on loans for Primary Residences.

A Family Opportunity Mortgage allows an individual to purchase a home for an aging parent or disabled child as a Primary Residence and receive owner-occupied financing even if they already have a mortgage and don’t ever intend to reside in the home. This makes the mortgage more affordable to the borrower and may offer additional cost-saving benefits, including lower property taxes and tax deductions for interest and property taxes paid. Additionally, there are no distance requirements, like there would be when financing a Secondary Residence, so a borrower can purchase a home for parent or child who is nearby.

What Are the Requirements for a Family Opportunity Mortgage?

To qualify for a Family Opportunity Mortgage, a borrower must meet the conventional loan eligibility requirements, including:

• A minimum credit score of 620;
• A 5% down payment;
• A 45% debt-to income ratio;
• Proof they can afford the costs of two homes;
• Proof of relationship to the parent or child; and
• Documentation showing the parent(s) or child are unable to afford the home on their own. This is usually done through pay stubs or Social Security documentation.

How Do I Apply for a Family Opportunity Mortgage?

A Family Opportunity Mortgage is a conventional loan under Fannie Mae/Freddie Mac with special guidelines, so most lenders offer them, including FNBO. If you are interested in more information or would like to apply, an FNBO Mortgage Loan Officer can help.