If you are looking to purchase a home for your aging parents who are no longer able to qualify for a mortgage you are in luck because there is a conventional loan program made just for you! Formerly known as a ‘family opportunity mortgage,’ you can purchase a single-family residence (up to 4 units) for your parents (or parents-in-law) that will be treated by underwriters as a primary residence and follow normal loan guidelines. This program only a 5% down payment.
Since it is considered a primary residence, there is no limit to the number of properties you have financed, you will not need reserves (unless it is a 2–4-unit property), and you can receive gift funds to cover down payment and closing costs.
This also works for refinance transactions, so if your parents are unable to qualify for a loan on their primary residence and a reverse mortgage isn’t the best option for (due to equity position or other reasons) you can also help them with a refinance to lower their interest rate.
When qualifying for this type of mortgage we will underwrite your file just like a normal primary purchase and you will not be able to use any potential revenue of your parents paying the mortgage to help qualify unless it is a property with an ADU or a 2–4-unit property. This means that you will need to be able to handle the new debt, or monthly payment, in addition to your current mortgage and other monthly debts (auto loans, credit cards, student loans, etc.).
It is not required that your parents hold title to the home, so you are able to hold title in your name only if you prefer.
In addition to the program that allows you to purchase a home for a parent who is unable to qualify you can also purchase a home for:
– A disabled or handicapped child who cannot qualify for a mortgage
– A college bound child
When purchasing a home for a handicapped or disable child evidence who is unable to work evidence of disability will need to be provided to the underwriter. This type of purchase will be considered a primary for underwriting purposes.
When purchasing a home for a college bound child you can purchase it as a second home which requires a minimum of 10% down (gift funds are allowed). You can also be a cosigner and purchase it with your child and have the home considered a primary residence, but they will need to have a credit score (or be able to meet the more stringent non-traditional credit guidelines) and be over 18.
Please note that not all banks or investors allow these programs even though they are written into conventional guidelines. Some institutions have overlays that prohibit these types of transactions. As always feel free to contact me with any inquires or clarifying questions.