Using the Family Opportunity Mortgage for Non-Owner Occupied Homes

The Family Opportunity Mortgage allows a person to buy a home for their disabled relative so they can live as independently as possible.

It also allows the caregiver to access mortgage funds to remodel an existing home, making it more accessible and handicap friendly. The caretaker can even gain ownership of the house if they need to move in at some point.

Today we will go over who can apply for this mortgage, what homes you can buy, and how it can help your family before you decide to use it.

Who is the Family Opportunity Mortgage for?

The Family Opportunity Mortgage helps families buy homes for elderly parents and disabled adult children.

So, if you're looking to buy a home for your aging parents or help your disabled child purchase their first home, you could qualify for this mortgage program.

So, who exactly qualifies as "family" in this situation? Here's what you need to know about the borrower, co-borrower, and property:

• The borrower must be either a parent or legal guardian of the child living in the home or the child of an elderly parent living in the home. There are no exceptions to this rule.

• A co-borrower can be anyone, related or not, but they must use at least one room in the house as their residence unless they have another primary home and are not disabled.

• If one or both parents live in a care facility, any family member can apply for this mortgage as long as they plan to move into the house once the mortgage closes. If neither parent lives with their spouse, any family member is also eligible to apply.

• The house must be the primary residence of the child or elderly parent. Additionally, they should not have owned another home within the last three years before closing on this mortgage.

Unique Benefits of the Family Opportunity Mortgage

The Family Opportunity Mortgage offers unique benefits that make it easier to purchase homes for family members who need support.

Lower Down Payments

This mortgage allows for down payments as low as 5%, and these can sometimes be gifted by family members, offering much more flexibility than traditional loans that often require 20% down.

Zero Occupancy Requirements

The Family Opportunity Mortgage does not have occupancy requirements, allowing you to buy a home for personal use or as a rental property, providing immediate rental income without residency restrictions.

Low Interest Rates

Due to higher property equity and lower loan-to-value ratios, the Family Opportunity Mortgage offers lower interest rates, leading to more affordable borrowing costs, especially for those with good credit.

Reduced Closing Costs

Closing costs for this mortgage type are typically lower, ranging from 2-5% of the mortgage amount, which can lead to significant savings when purchasing a home for a family member.

Family Support for Dependents

This mortgage enables direct financial support for dependents, such as young children or aging parents, especially beneficial if you are the primary caregiver and reside nearby.

Homeownership Instead of Rent

The Family Opportunity Mortgage can help an adult child transition from renting to owning, allowing them to build equity in their home and potentially save on rent, property taxes, and insurance.

Flexible Property Location

There are no strict location requirements for the purchased property, allowing the home to be anywhere, which increases the flexibility and appeal of the Family Opportunity Mortgage for various family situations.

Family Opportunity Mortgage Qualification Requirements

To take advantage of the benefits of the FOM (Family Opportunity Mortgage Program), the borrower, family member, and property all have to meet certain requirements:

FOM Borrower Requirements

• Be a parent or legal guardian of the child living in the home or the child of an elderly parent living in the house.

• Have a minimum credit score of 620.

• Have a debt-to-income (DTI) ratio of 45% or less.

• Have sufficient income to qualify for the mortgage.

FOM Elderly Parents and Disabled Adult Children Requirements

• Be unable to work or do not have sufficient income to qualify for a mortgage on their own.

• Be a U.S. citizen or permanent resident.

• Have a valid Social Security number.

FOM Property Requirements

• The property must be the primary residence of the elderly parent or disabled adult child.

• No specific distance requirements exist unless it’s for a college student, in which case the property must be within 100 miles of the college.

• The elderly parent or disabled child must not have owned a primary residence within the last three years.

• The property can be a single-family home, a condominium, or a townhouse.

Helpful Tips Before You Apply for the Family Opportunity Mortgage

Here are a few things that could be helpful to know before you apply for the Family Opportunity Mortgage:

The Elderly Parent can be a Co-borrower

An elderly parent can join the loan as a co-borrower, which can help with qualifying for the mortgage.

The parent must be at least 62 years old and not be a co-borrower on any other mortgage, especially not on a Fannie Mae-backed mortgage.

You Need Documentation for a Child's Disability

If you're applying to help a disabled child, you'll need a doctor’s note. This note must describe the child's disability, state that the child cannot work full time, and need full-time care for over six months.

This mortgage option isn’t available if the disabled person has been or can work full time for five or more years.

There Are Certain Requirements for a College Child

For parents looking to buy a home for a child attending college, there are specific conditions to meet:

• The child must be enrolled in college and attending at least half-time.

• The home must be within 100 miles of the college.

• The child should be under 21 years old and not have any other ownership interest in a primary residence or investment property.

Reasons to Pass on Using the Family Opportunity Mortgage

The Family Opportunity Mortgage isn't appropriate for everyone, though. Sometimes, you may find that other options better suit your needs.

• Strict Qualification Criteria - The requirement for a minimum credit score and a specific debt-to-income ratio can limit eligibility.

• Specific Family Definitions and Residency Requirements - The program is restricted to immediate family members, and the property must be the primary residence of the assisted family member.

FAQs on the Family Opportunity Mortgage

Can the Family Opportunity Mortgage be used for properties in any state?

Yes, the Family Opportunity Mortgage is available in all 50 states, as long as the borrower and the property meet Fannie Mae’s guidelines.

Are there property type restrictions for the Family Opportunity Mortgage?

Yes, the mortgage can be used to purchase single-family homes, condominiums, and townhomes. Multi-unit properties and investment properties do not qualify.

Can the Family Opportunity Mortgage be refinanced?

Yes, borrowers can refinance an existing Family Opportunity Mortgage to take advantage of lower interest rates or improved financial terms, provided they continue to meet the program requirements.

What are the insurance requirements for the Family Opportunity Mortgage?

Borrowers must obtain homeowners insurance that meets Fannie Mae's requirements, which typically includes coverage for the full replacement cost of the home.

How does the Family Opportunity Mortgage handle multi-generational families?

The program can be especially beneficial for multi-generational families looking to purchase a home for elderly parents or disabled adult children, allowing them to live independently yet close to family support.

Does the Family Opportunity Mortgage require a larger reserve of funds?

No, the reserve requirements for the Family Opportunity Mortgage are generally consistent with other Fannie Mae loans, typically necessitating reserves from 2 to 6 months of mortgage payments, depending on the borrower’s overall financial situation.

Can the Family Opportunity Mortgage be used in conjunction with down payment assistance programs?

Yes, borrowers can combine the Family Opportunity Mortgage with eligible down payment assistance programs to help cover the down payment and closing costs, as long as all program guidelines are met.

What happens if the family member moves out of the home purchased with a Family Opportunity Mortgage?

If the family member for whom the home was purchased moves out, the borrower is still responsible for the mortgage. The property can then be occupied by another family member or rented out under the terms of the mortgage agreement.

Are there any specific documentation requirements for proving family relationships in the Family Opportunity Mortgage?

Yes, borrowers may need to provide legal documents such as birth certificates, guardianship documents, or power of attorney forms to establish the qualifying family relationship required by the program.

How does the Family Opportunity Mortgage impact the borrower's ability to qualify for other loans?

Having a Family Opportunity Mortgage can affect the borrower's debt-to-income ratio but does not necessarily preclude qualifying for additional loans. Lenders will consider the overall financial stability and creditworthiness of the borrower when assessing loan applications.

Check Your Family Opportunity Mortgage Program Eligibility

The Family Opportunity Mortgage presents a unique opportunity for individuals looking to buy homes for their elderly parents, disabled adult children, or college-going kids.

It's a specialized mortgage product that considers such purchases as owner-occupied properties, enabling borrowers to benefit from lower interest rates and other favorable terms typically unavailable for non-owner-occupied properties.

At MakeFloridaYourHome, we can help you determine if you qualify and guide you through the entire application process.