Please check out my more recent blog on updated rules and requirements for the Family Opportunity Mortgage here.
Not many people know about this Fannie Mae mortgage program, so please keep it in mind as an opportunity. Fannie Mae’s Family Opportunity Mortgage helps families buy or refinance a home for elderly parents or disabled children and take advantage of owner-occupied interest rates. So even though the qualifying family member may already have an owner-occupied home, they can still take advantage of this program. Otherwise, the loan would have to be structured as an investment property, which has higher interest rates, qualifying restrictions and larger down payment or equity requirements.
Here are general requirements for the Family Opportunity Mortgage.
Assisting your elderly parents:
- Must be able to document that the parents are unable to afford the mortgage (provide parents’ tax returns)
- You must qualify for both your home and the parents’ home
- Property must be occupied as the primary residence by the parents
- Property location can be near you; it does not need to be a certain distance away
- Must provide a letter explaining the parents’ financial inability and their intent for occupying the home
Assisting your disabled adult child:
- General requirements are the same as assisting elderly parents, but must be able to document that your child is disabled.
Some additional information and requirements:
- You cannot own any investment properties
- Purchase or rate & term transactions only (no cash-out refinances allowed)
- Family member you are purchasing for does not have to be on the loan or on title
Interest rates on this program are the same as rates for a primary residence purchase, since this is how the loan is structured. There is no other case where having two “primary” residences is acceptable.
Just wondering if the family opportunity mortgage has any restrictions on the amount of the mortgage
Hi Janice, since it’s a Fannie Mae program, the only restriction is that the loan amount cannot exceed the high-balance limits for the county in which the person is purchasing.
I am going through a Family Opportunity Mortgage right now to by a house for my disabled parents. All is well except getting the homeowners insurance. The underwriter needs a owner occupied homeowners policy since it is structured as an owner occupied loan but the insurance company will not cover it as owner occupied coverage since I will not be living there and own another house that I live in. My question is how do you get insurance for this type of structured loan?
Hi Tommy, that’s frustrating. I never had an underwriter or an insurance company question what my clients did. Can you try a different insurance company, or if they continue to give you trouble, ask your loan agent to escalate the issue at the lender? Good luck.
Hi Tommy, what did you end up doing? We are having a similar problem.
I am experiencing the same situation on a loan. The insurance agent does not want to issue an owner occupied policy because our borrower is not occupying the property. Would a rental policy be acceptable in this case?
Hi Norma, this comment went to spam, sorry for the delay. Did you get it resolved?
Do you know any lenders who do this program with 5% down in South Florida. Every lender I talk to either doesn’t know about this program or does not have an investor to sell it to?
Hi Andrew, I’m only licensed in the state of California, and am not familiar with lenders or programs offered in other states. This is a Fannie Mae program, so it should be nationwide, but lenders may have “overlay” rules. Good luck finding someone!
Try Regions Bank
Do you know what lenders have this program in California? Who do you recommend?
Hi Rose, I work with a handful of lenders that have this program and would be happy to help you secure financing. Send me an email (firstname.lastname@example.org) with your details and situation, and I can get back to you with numbers, interest rates and to answer any questions you have.
My elderly parents currently live abroad and are moving to the USA, and we plan to buy them a home. But because they are coming from abroad they don’t have US tax returns. Can I still apply for the FHO loan? Are there other ways to show proof of income?
Hi Sarah, unfortunately, the underwriter/lender has to determine that your parents have insufficient income to qualify on their own, and the only way to do that is through tax returns. So if they did not file for U.S. taxes the previous two years, you cannot apply for this type of mortgage.
My mom and I bought a property together in 2014 that she lives in. I maintain my own separate single family primary residence. The property my mom lives in was purchased as an “owner occupied” property and I assisted her with a 20% down payment. She wouldn’t get qualified for the loan on her own due to her low income. Now we are both on the loan and title. My question is about property taxes and mortgage interest. Since her income is low, she would not benefit from itemized deduction and will, therefore, be filing her taxes with standard deductions. That said, can I claim the property taxes and mortgage interest paid on the house on my tax returns by identifying the house she lives in as my second home? And does it matter if the mortgage statement and interest statement we received only has my mom’s name on it?
Thank you for your help,
Irene, is it true that you cannot already own investment properties to qualify for the Family Opportuntiy Mortgage?
Hi Rob, I never got alerted to a new comment; my apologies for this delay. Yes, that is correct. If you want to purchase a home for an elderly parent or disabled child and take advantage of Fannie Mae’s primary residence exception, you cannot own any investment properties.
My mother is on SSI and does not file taxes. We are in Washington State. Please help me get my mother into a home. She is currently living in a 5th wheel behind someones property. This 5th wheel is old and falling apart. We would only have 3-3.5% to put down. My husband and I just purchased a home in Jan of this year. So this would be a home for her but us qualifying for the loan. What can you recommend for us?
Hi Tia, I cannot assist you with this loan since it isn’t in CA, but if your mom’s SSI is not sufficient enough to qualify for a home, then it sounds like something you can help her with, assuming you also qualify for both housing payments. I recommend contacting Rhonda Porter http://mortgageporter.com/contact-rhonda-porter for assistance in Washington State. Good luck!
Are there age limits for the “elderly” parent? My parent is 60 and i would like to use this loan.
Hi Jacki, thanks for your inquiry! There are no age limits for the parent; we just need to document that they cannot afford the housing payment. If the purchase of the home is in CA, this is something I can assist you with. thank you!
I am trying to find a lender for a client who is looking to purchase a home for his mother in law in FL. I realize you are in CA, but was hoping you may have heard of any reliable lenders in FL.
I am not familiar with this program, and I don’t have lenders who would offer this program, but trying to help my client with their research.
Thank you in advance for your help!
Hi Elena, your comment went to spam; thus, my delay. Any lender that follows Fannie Mae guidelines with no overlays should do this loan. It’s part of their definition of a “primary residence”. Most of my lenders will lend on this with no issues or overlays, so it should be pretty easy to find. Good luck!
Hi. My father is on a fixed social security income. He can currently afford his loan, but it is an ARM, and it is going to adjust in Jan 2019. At that point, he may not be able to afford the payment. Can this program be used to help him refi to a rate similar to what he has now. His ARM rate now is only 3%.
P.S. I used to have a 408 area code about 20 years ago – brings back good memories.
Hi Dave, the lender would look at your dad not being able to afford the mortgage at the rate he’s refinancing. Rates are not at 3.0% any longer, but if he does not qualify at the current rate, then that can work to have you as the borrower and qualify for that mortgage. I know it would be hard to give up that 3.0% rate, but that’s what we would be looking at. Please email me directly for any follow up questions – email@example.com
Hi, Irene. I’m wondering what ratio of mortgage amount vs. parental income an underwriter would need to see to qualify a loan in this program based on Fannie Mae policy. I’ve heard a few differing numbers and just wondered if there is an absolute threshold published anywhere, or if it simply varies based on the lender’s internal policies. So, for example: for a 800/month loan, would a combined monthly parental income of 2k allow me to purchase a home for my parents under this program, or would they be deemed able to afford on their own?
Also, can the term of the loan be adjusted to make qualification easier? For example, getting a higher monthly payment via a 15 year loan as opposed to a 30 in order to move them more firmly into “can’t afford” classification?
Thank in advance!
Hi Ian, Fannie Mae allows qualifying ratios of either 45.0% max, or 50.0% max. Up to 50% depends on less risk, but it’s for Fannie Mae to determine. If we’re looking at $800/month total housing payment obligation divided by $2000 monthly income, then that ratio is 40%, and therefore, your parents would qualify on their own.
Great question asking about the 15 Year loan. I just ran this by one of the lenders they work with, and they said that the qualifying requirement would be based on the product you are applying for. So if this brought your parents’ ratio above 45% or 50%, then yes, you would buy for them as a primary residence, assuming qualifying and other requirements are in place.
Send me an email directly if you have additional questions – firstname.lastname@example.org Thanks!
I was wondering if I would qualify for this loan to purchase for my mother. I live in an apartment, but I own a home that I’m renting out for the amount of the mortgage so I’m not making money off of it. Does that still qualify as an investment property? If so, could I apply for the FOM with my sister who lives in her home and meets the other qualifications, but maybe not the income based on the amount of mortgage we’re looking at? Thank you!
Hi Stacy, as long as you can document that your mom herself is unable to afford the mortgage/housing payment, then you can purchase a house for her under this program (and with your sister as well). If I can help, and if the property is located in California, I can assist with the transaction. Thank you!
Hello! I have a question, I purchased a home for my mom last year under this program. Great program! I do have a question though… since she did not qualify for the payment on her own, we each contribute to the pmt. Do I need to report her portion as ‘income’ on my tax return? Thanks in advance!
Hi Patricia, this is a question for your CPA or accountant. Sorry I can’t assist with this one!
If you purchase a home for a disabled child via the Family Home Opportunity mortgage, can you treat the home as rental property for tax purposes. Our disabled daughter will live with one roommate, both of whom will pay rent. It has been extremely hard to find an answer to this question.
Hi Jeff, if your intention is to collect rental income on the property, then you should technically apply for the loan as a rental property. You are certifying that the purpose is for owner occupancy and therefore not going to collect rent. Lenders do have you sign an occupancy affidavit stating no rent would be collected for at least 1 year. Please email or call me to discuss further.
Hi Irene, I am the disabled parent. I didn’t file taxes for the three years before my claim and approval because I had no income. I did get a settlement that I plan on using for a downpayment. I presently live in AZ and my daughter wants to help me buy a home closer to where she lives in MN. She has great credit–a FICO of 800. I have zero credit–none. Her name is not on the mortgage of the house she lives in (she moved in with her partner.)
From reading the comments, it seems we likely wouldn’t qualify for the Family Mortgage because of my tax record. So the only remaining options seem to be for us to go in as cosigners–which might not fly because of my limited income and lack of credit–or for her to buy the home in her name, but then be subject to all the pitfalls of an investment property.
Is that about right? Would you have any suggestions for us? Thank you!
Hi Jessica, you should qualify just fine for this. An underwriter may require to order tax return transcripts directly from the IRS though. If you did not file taxes, then the result will show “No Record Found”. That, coupled with a letter explaining you did not file taxes due to lack of income, should suffice. I wish I could help you, but I can only assist if the property was in California. Good luck!
What if some time after the purchase and loan is established the parent decides to move? Is the any issues related to this occurance?
Hi John, the owner-occupancy affidavit you would be signing states that you (the parent, in this situation) will be living in the home as the primary residence for 12 months minimum. After that timeframe, it would be okay to move out or convert it to a rental.
What happens if, after using this program, the parent needs to transfer to assisted living and is unable to occupy the home for the 12 months that are required?
Hi John, thank you for reaching out directly via email with your question. I hope I provided some guidance. Best of luck to you, and your parent.
Is this program still available in 2019?
Yes! Contact me via email for a specific scenario – I can assist if the property is in CA.
We want to purchase a condo for my disabled daughter. She hit her head at work in September 2018 and now has brain damage and is unable to work. She did work prior to the accident so she has tax returns. I’m wondering what information would be required for her to qualify? She doesn’t have any income at all, we would get the mortgage for her.
Hi Jayneen, firstly, I’m sorry to hear about this situation and your daughter’s brain injury. Most underwriters won’t require documentation for her disability or inability to work, and would just want an explanation from you. I can assist if your property purchase is in CA. Please feel free to email me directly to run some numbers or proceed: email@example.com
Thank you for all this information. This is really helpful. We (my husband and I) are also thinking of using the Family Opportunity Mortgage to buy a property for my parents to live in; the property will be around ~300 miles away from where we currently work and live. I’ve talked to a lender who says we can use the FOM to structure the loan as a primary residence and owner occupied.
I’m wondering about the implications for our tax return: will this property be considered as primary residence (given our work/current residence), and will the IRS need proof? In the future, if we were to buy another property where we will live, can this second property also be considered as primary (if we have the financial means to do so), and will the IRS consider both properties as primary residences?
Hello Anne, thank you for commenting on the blog. You would need to ask your tax accountant how the IRS would look at this. The allowance is purely from the loan perspective based on Fannie Mae’s definition of a primary residence, not necessarily how the IRS would look at it. Wish I could be more helpful, but definitely speak to your accountant.
Great info. Can FOM program work for multi- family properties? Can a $1,000,000 property still qualify for this loan?
Thank you for your time.
Hi there, if you buy a 2-4 unit home, Fannie Mae doesn’t show restrictions; however, we probably cannot use any rental income from the other units to help qualify. For the $1MM property, as long as you have enough down payment to not exceed the high balance loan limit in the county you’re buying in, you should be fine. Please email me directly for follow up questions, firstname.lastname@example.org, if you are looking to buy in California. Thank you!
Are there restrictions on property type? Specifically, manufactured home/older homes?
Hi Kelly, the home must be 1-4 units, residential.
Hi Irene, I’m thinking about helping out my parents in buying a home in my current neighborhood in California so my parents can be nearby. The questions I have are:
1) My parents own a rental property and have property of their own (just over 1000+ miles away from me), and the dilemma is they just can’t qualify for a loan anymore (income in general is low, and this includes rental income). Would they be able to qualify FOM?
Hi Charlotte, yes, they should be able to qualify for this mortgage. The underwriter may want to document their income (or lack thereof) to confirm they cannot afford the mortgage, but that would be underwriter discretion. Send me an email if you’d like to discuss this further.
Can I use this program to buy my mother in law a house or is this strictly just for my own parents only?
Hi Zvang, buying for your in-laws is no problem. Please let me know if I can be of further assistance.
I’m here in Massachusetts, just outside of Boston. Hearing about what is sometimes called the Family Opportunity Mortgage gives me some hope.
I am disabled and have been unsuccessful in securing a one-level home which I medically need. Although I have exceptional credit, 828, on Experian Fico 8, and excellent credentials, my SSDI income is very low, combined with being awarded a housing choice voucher, I am often overlooked in the rental market because of active discrimination that still exists due to the voucher and can’t afford a home on my own.
Are you aware of any lenders in my area that may do this loan and/or someone we can reach out to that may further guide us to someone who could help?
As the rental market here is very tight, I am trying to think outside the box. My son is interested in helping me if he can to purchase a home for me to live in. However he isn’t in a financial situation where he can pay the monthly mortgage for me. He has decent credit and thinks he will qualify as “primary residence” under this definition. He owns a condo with his girlfriend and he owns no other properties.) My idea is to then see if my housing would approve a reasonable accommodation to rent from my son, using my voucher. I am familiar with the RA process and have been approved for other requests before, and have read that this is possible to rent from a family member in my situation if approved. (as I can show I haven’t been able to find any housing within the payment standard, that meets my disability needs).
With your understanding of the expanded definition of primary residence…etc., through this loan, am I allowed to make payments to my son for rent using my federal voucher. FYI, you may be aware that there is a Section 8 Homeownership program that allows the voucher holder to use their voucher to pay the mortgage, however my income is too low, as I mentioned, so I don’t qualify for a mortgage on my own.) And would the lender qualify my son using the voucher as rental income, in this instance?
Hi Laura, I unfortunately am not able to help you in MA. Your best bet would be to find a mortgage broker that works with lenders that have no overlays to Fannie Mae’s guidelines. However, in purchasing this property under this definition of a primary residence, the lender could call the loan due if your son collects rent from you in the 1st 12 months of the loan. But it would be best to contact someone that can assist you directly in MA. Best of luck to you!
Thanks for this article. We plan to purchase a home for my mom using the Opportunity loan. These may be CPA questions, but thought I’d ask:
1) If my mom moves out of the home (e.g. to assisted living) and I sell the home, would this be treated as a primary residence for capital gains purposes.
2) If my mom moves out of the home and I want to use the home as a rental (and reclassify it a such), would the current lender/loan owner want to or be able to modify the terms (e.g. by raising the interest rate)
Hi Thomas, thank you for your questions! # 1 definitely ask an accountant. In # 2, it does not matter to the lender how you use the property after a 12-month period from closing. So at that point, you can certainly convert it to a rental property and no terms of the loan would change. Let me know if I can assist with any financing needs in CA.