What is a Family Opportunity Mortgage?

Did you know that there are many types of home mortgage? Each with their own requirements, terms and conditions, there’s a dizzying array of options from all the different mortgage lenders out there. While it can be good to read up on different types of loans available before beginning your search for any purchase, one major concern in any type of loan is income. Lenders will not approve you for a loan if you can’t afford it. This can make home-ownership a tough proposition for those on fixed incomes- especially retirees living on retirement plans or Social Security.

More so than any generation before them, Baby Boomers are reaching retirement age with both their health and their spirits still intact. This generation has worked hard and, in some cases, are finding that the rising cost of homes are keeping them from purchasing a home for their retirement. After all, retirement and freedom from having to work should mean choosing more interesting or relaxed environments to live, finding better weather or amenities, or being closer to family. It can also be a great opportunity to find a home that’s right sized and built with accessibility in mind. Home-ownership has always represented freedom and stability, and for retirees, this is especially true.

One mortgage type available is known as the “family opportunity mortgage”. Introduced by Fannie Mae, this allows for adult children to purchase a home for their parents. Typically, mortgages can be dived between primary residence loans and those for second or investment properties. Primary residence loans offer more favorable down-payment terms and better interest rates. These family opportunity mortgages offer those same great conditions, allowing you to purchase a second home while still having access to some great financial incentives.

If you’re interested in a family opportunity mortgage, you’ll need to make sure you have a credit score of at least 620, steady employment with income great enough to cover both your current expenses and the new expenses for the second property, and a debt-to-income ratio that doesn’t exceed 45%. Another major factor is that your parents will need to be able to prove that they do not meet the income requirements in order to be approved for a mortgage on their own. This program isn’t just for parents, however, and the same type of loan can be used to purchase a home for an adult child with disabilities.

We love our families, and want what’s best for them. Should you find yourself in the position, gifting someone a home is one of the best things you can do. As our parents age, it can be hard for them to give up their independence. Help them make the most of their retirement by considering the value proposition of a family opportunity mortgage. Not only will you be giving your parents a roof over their heads, but you’ll also be building equity on a second property- meaning a brighter financial future for yourself, too. It’s a great way to pay it forward to the wonderful people who raised you and gave you your start in this world.