Are you looking for an affordable way to provide housing for elderly parents or your disabled adult child who cannot qualify for mortgages independently? We have some great news.
You may consider buying the second home as an investment property. However, this approach comes with high-interest rates and strict rules.
Fortunately, by opting for the Family Opportunity Mortgage, you can purchase a home for your adult child with special needs or elderly parents without meeting conventional investment property loan requirements.
This post will tell you all you need to know about Family Opportunity Mortgage loans, highlighting their benefits and what you and your loved ones need to qualify.
Article at a Glance
Family Opportunity Mortgages lets you buy a home at low rates even if you are not the home’s primary resident.
- They offer several benefits, from affordable down payments to higher debt-to-income ratios.
- Your elderly parent or disabled adult child can qualify even with poor credit.
- The loan program has no distance requirements.
- A and N Mortgage can offer you the guidance you need to find the best possible FOM loan structure for you and your family.
What Are Family Opportunity Mortgage Loans?
We understand the many challenges Americans face when trying to provide senior citizens with safe living environments. While some often opt for renting cheap properties, most prefer their family members to own the home. Unfortunately, the structure of most loans proves to be an obstacle for many.
For instance, when taking out a loan to buy a second home, the necessary down payment is often relatively high. Most lenders ask for 10%, with others requiring as much as a 20% down payment.
Second, the homeowner’s insurance premiums for that second home will also be more expensive and have higher interest rates, especially on long, fixed-term loans. Fortunately, a Family Opportunity Mortgage can help you avoid these costs.
A Family Opportunity Mortgage capitalizes on a loophole within the Fannie Mae rulebook. The loophole states that people can take advantage of “owner-occupied” rates and guidelines if the person occupying the second home is elderly or has a disability and is unable to qualify for a loan on their own.
This mortgage program helps people who desire to set up housing for elderly family members or adult children with disabilities but do not have enough money for down payments. It lets you buy your loved ones’ home at the same down payment and mortgage rates as if you were the one going to live in the house.
The program provides you with an interest-free loan, which the government forgives after ten years. Furthermore, the mortgage structure makes the payments affordable over time while still covering the property’s total value.
Benefits of Family Opportunity Mortgages
The following are some of the key advantages the Family Opportunity Mortgage loan can offer you.
Lower Interest Rates and Down Payments
Loans for most investment properties often require a down payment between 10% and 20%. However, Family Opportunity Mortgage loans only ask for 5%. If that wasn’t enough, the program’s interest rates are also low.
When you combine the low down payments and interest rates, choosing this type of financing is one of the best ways to provide senior housing to an aging loved one.
You Don’t Have to Name Your Parent or Child in the Loan
You don’t have to include the home’s occupant in the loan, meaning your adult child or aging parent can qualify even if they have high debt or poor credit. This benefit is significantly helpful since senior citizens, and those living with disabilities, often have high medical expenses that can negatively impact their credit.
It Has Higher Debt-to-Income Ratios
Another significant benefit of this loan is the high debt-to-income ratio. Conventional loans require you to have a debt-to-income ratio of around 40%. This ratio means that your loan payment, plus other unsecured loans and existing debts like credit card bills and car payments, cannot be more than 40% of your monthly gross income.
On the other hand, Family Opportunity Mortgage loans understand that providing housing for elderly parents or an adult child with special needs is not easy for many households. The program considers this and allows borrowers to have a debt-to-income ratio as high as 50%.
It Is Cheaper than Care for Senior Citizens
This mortgage option is often cheaper than paying for a nursing facility or senior living. You will find purchasing a second home and setting up in-home care more cost-effective than paying for senior care. The best part is that buying the house allows you to enjoy the additional benefit of appreciation.
You Do Not Have to Reside in the Property
While some loans require you to be the primary resident of the property to qualify, this is not the case with Family Opportunity Mortgages. In addition, the program has no distance requirements from your primary residence to the property you are purchasing.
Qualifying for a Family Opportunity Mortgage
While this financing option allows you to purchase a house with little or no money down, there are specific requirements you will need to qualify.
Before applying for a Family Opportunity Mortgage loan, you will need to have:
- A credit score of at least 620
- Steady employment for the last two years
- Sufficient and stable income to support all expenses of your current home as well as the one you are buying
- No recent foreclosure or bankruptcy filings
- A debt-to-income ratio of around 45%, though this can be higher depending on your Automated Underwriting response
Besides these, there are additional qualifications that the home’s occupant must meet, depending on whether they are an aging parent or an adult child with special needs.
Additional Read: Everything You Need to Know About Multifamily Properties 2022
Qualifications for Your Elderly Parent
While there are several factors that lenders will consider, it is not complicated for your elderly parent to qualify for this financing option. Most importantly, they must either have insufficient income or be unable to work to qualify.
Though they can receive assistance income, this income should not be sufficient enough to enable them to afford a home. The home must also be their primary residence.
On top of these qualifications, you will need to document their situation. This process will require:
- Proof of relationship
- Proof of income, including pay stubs from their employer
- A letter of explanation stating that you plan to retain your primary residence and that the purchase of the home is for the benefit of your elderly parents
Qualifications for Your Special Needs Adult Child
The necessary qualifications for an adult child with special needs are slightly different. For starters, you must document evidence of your child’s disability. Several disabilities would enable your child to qualify, including ADHD, Down syndrome, and Cerebral Palsy.
You can have your child live with an elderly parent, with the program permitting you to name the child as the home’s primary resident and the elderly parent as the secondary resident. Doing so allows your child to enjoy some independence and gives you peace of mind knowing that they live in a safe place.
Eligible Properties
In addition to the qualification requirements mentioned above, you should also keep in mind that Family Opportunity Mortgage loans do not apply to all homes. The program has restrictions regarding the type of home you can purchase.
The program only covers single-unit dwellings, meaning the property cannot be a timeshare, vacation home, or any other type of investment home. Additionally, you must be the primary person responsible for controlling the house. You cannot allow a management firm to manage the home’s care or occupancy.
In Conclusion
Having a home is something in which we all take pride. Thanks to affordable loan programs like the Family Opportunity Mortgage, you can help your elderly parents or disabled adult child achieve security and independence.
This program is one of the best opportunities American families have, helping them purchase a second home with low down payments, interest rates, and affordable monthly payments.
Due to the program’s unique features, it’s never been easier for you to buy a second home. If you have elderly parents or an adult child with special needs, you can now provide them with the sense of freedom that comes with residing in their own home.
Additional Read: Different Options for Down Payment
Find the Best Loan for You
As beneficial as FOMs are, finding the right loan requires a lot of research and expertise. Fortunately, you can turn to the professional loan officers at A and N Mortgage Services.
A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.
