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Family Opportunity Mortgages: Assisting Loved Ones in Homebuying

Multigenerational living (3 or more generations under one roof) is more prevalent than ever before, with some 6 million US households enjoying benefits such as conserving capital and forging closer familial relationships. But living in tight quarters with parents, kids, and elderly relatives isn’t an ideal situation for those who yearn for more privacy and independence.

Millions of seniors struggle to afford rent or mortgage payments on their own, and this crisis will only grow as the “silver tsunami” surges. Many disabled adults face the same issues, especially if they are unable to earn enough money to support themselves or if there isn’t adequate subsidized rental housing in the area

However, the real estate landscape is constantly evolving, and a knowledgeable mortgage loan expert can help you explore purchasing options that meet the needs of your parents, siblings, or adult children with special needs.

A Family Opportunity Mortgage (FOM) from Fannie Mae might be the perfect solution for helping your loved ones feel right at home — let’s take a closer look at the eligibility requirements, advantages, and next steps for this specialized loan product. 

It’s worth noting that Fannie Mae no longer refers to these loans as Family Opportunity Mortgages but does still allow children to obtain a mortgage on behalf of their parents if they’re not able to work or earn sufficient income on their own.

Understanding FOMs

With a booming job market and new construction lagging, there’s an ongoing shortage of affordable housing in Chicagoland. Add in higher interest rates or the persistent specter of a looming recession, and many people may feel they’ll be sharing space with their family members forever. 

On top of climbing asking prices, strict lending standards for conventional mortgages can block access for those without a certain credit score or substantial down payments ready at hand. Facing these obstacles, your relations may feel that owning their own abode lies frustratingly out of reach.

Typically, interest rates and down payment requirements are higher for second homes and investment properties. The Family Opportunity Mortgage allows you to get a mortgage for your elderly parents or disabled adult dependents as if it were going to be your primary residence, according to US News & World Report, with the new loan subject to the same guidelines and rates as an owner-occupied residence. 

Borrowers must meet Fannie Mae’s eligibility and underwriting goalposts, and the FOM program allows you to have a down payment as low as 3%. If your parents, children, or other dependents do not qualify for a mortgage on their own, and you have adequate income and good credit, you are considered the owner-occupant, enabling you to buy this residence more affordably than a typical second home. 

Additionally, purchasing a home for a disabled family member may prove to be a financially prudent choice, as the mortgage payment could be substantially lower than the cost of alternative care arrangements.

Features and Flexibility of the FOM

This creative loan program permits borrowers to reap some of the benefits of real estate investing while providing a stable home for a loved one who needs assistance. 

Fixed income via Social Security or SSDI payments doesn’t always cut the mustard these days when it comes to the rising costs of housing, food, utilities, and other essentials. For Gen X’ers and Millennials in a strong financial position with elderly or disabled dependents, this move could be a lifesaver for someone you love. 

Buying a home via an FOM could also give you an array of tax deductions, depending on your individual situation. You may be able to claim your parent, child, or other relative as a dependent or deduct their qualified medical expenses. 

You may also be able to get a break for the mortgage insurance or state and local property tax on the property as well. Always consult with a qualified financial advisor or tax expert to ensure you’re making the right move.

Empowering Greater Independence

Families are stronger together, but that doesn’t necessarily mean you have to be right on top of each other. Yet there’s a dearth of affordable and accessible rental housing for active seniors and adults with special needs in the Chicagoland area, and costs for retirement homes are skyrocketing. 

Applying for a family opportunity loan could give your elderly or disabled family members who are unable to qualify for their own mortgage the freedom to live their lives with dignity and stability. It’s also a path to purchasing a potentially valuable second property with the lower down payment and more favorable interest rates of a primary residence.

Every homebuying journey is unique, and it’s crucial to partner with an experienced mortgage lender who can help you explore every option for your family — reach out to me today!

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