How To Buy A Home For Your Disabled Adult Child



The extremely low mortgage rates that are advertised on TV, radio, and the internet are typically reserved for people looking to buy a home that they plan to occupy as their main residence. A 2nd home or a vacation home generally is not afforded the same low rates.

This can create quite an issue when a person wishes to buy a home for their disabled adult child that is living with a disability.

For this reason, Fannie Mae has offered the Family Opportunity Mortgage program to help people in these situations.

How To Buy A Home For Your Disabled Adult Child
How To Buy A Home For Your Disabled Adult Child

Understanding Owner Occupied Rule

For most loans like FHA, USDA, VA, or even most Fannie Mae and Freddie Mac home loans, the borrower must plan to live at the home as their main residence. This is the meaning of “owner-occupied.” In literal terms, the owner of the home also occupies or lives in, the home.

Unfortunately, other people are competent to live on their own but do not have the financial assets to afford their own home. The majority of these people have some type of disability that prevents them from pursuing a typical career track and earning increasing wages throughout their life. These people are not able to take advantage of low mortgage rates with an owner-occupied mortgage because they cannot afford the down payment and monthly payments needed to maintain a home.

Family Opportunity Mortgage To the Rescue

Like a superhero appearing at just the right moment to save the day, the Family Opportunity Mortgage from Fannie Mae shows up to help people with adult disabled children.

  • The parents can sign the loan on behalf of their child.
  • The parents are not required to live in the home as their main residence.
  • The parents are allowed to have an existing mortgage on another property.
  • The main requirement is that the child must be able to document some type of disability and show that this disability prevents them from earning enough money to afford a home on their own.

Getting Pre-Approved for the Family Opportunity Loan

Getting a pre-approval letter from a lender for the Family Opportunity Loan is almost identical to getting approved for any conventional mortgage.

The borrowers will need to present documents showing their income for the past 2 years. This will include W-2’s from their jobs, recent pay stubs, and tax returns if anyone is self-employed.

They will also need to show proof of down payment. This can be in the form of bank saving statements, investment portfolio account statements, or any other type of investment that represents the source of the down payment for the home loan.

The parents will also be subject to a credit report review to ensure they have strong enough credit to get approved for the loan.

Better Ratios for Debt to Income Calculations

If a parent or parents currently have a home mortgage and other debt, it would seem a bit of financial stress to take on a 2nd mortgage on a separate mortgage.

The guidelines state that the debt to income ratio can be as high as 50% for the Family Opportunity Loan.

This means that the parent’s income will be compared to the current monthly debt payments plus the proposed mortgage payment for the new home.

Provided that the ratio is 50% or less, then the borrowers will have a good chance of getting approved for the loan.

Some lenders may have loan overlays that require reserves of 3 to 6 months’ worth of mortgage payments. Each lender will be slightly different, and your loan officer can explain these differences to you.

Fannie Mae Does Not Require Large Down Payment

As previously mentioned, the best interest rates do not typically apply to the purchase of a vacation home or an investment property. Also, buying a vacation home or investment property normally requires a down payment of at least 20% of the purchase price. For a typical home priced at $150,000, this means that the down payment would be $30,000.

HOWEVER, Fannie Mae does not require this large of a down payment for the Family Opportunity program.

Typically, the down payment is only 5%. So, for the aforementioned $150,000 example, the family would only need to pay $7,500 for a down payment. This is a savings of $22,500 just in the down payment.

This one feature of the Family Opportunity loan makes the program a much more appealing option compared to a private care facility or other similar assisted living options.

There are No Restrictions about Location

Typically, when people wish to buy a 2nd home, also called a Vacation Home, there is a rule that the 2nd home must be a minimum of 100 miles away from the borrower’s main residence.

The Family Opportunity mortgage does not have any restrictions about the location of the home. The home for the adult child can be located across town from the parents or it can be as close as next door.

Why Does Fannie Mae Offer this Program?

There may be a question mulling around like “this all sounds good, but why is Fannie Mae offering this kind of loan?”

The simple answer is RISK.

All mortgage loans are a risk by the lender. The lender is extending money to the borrower in hopes of getting repaid, plus interest. The higher the risk, the higher the interest rate and the higher the subsequent private mortgage insurance.

Fannie Mae feels that it is a good risk to afford parents a feasible option to purchase a home for their adult children with disabilities. Fannie Mae also feels that a parent is much more likely to do their best to make the payments compared to making payments on an investment property.

Summing Up How To Buy A Home For Your Disabled Adult Child

With the low down payment and great rates offered by conventional loans, the Family Opportunity loan from Fannie Mae is a wonderful option for people with adult children that need a bit of independence while keeping them close to home.

The Family Opportunity Mortgage is not just for your disabled adult child. The program can also be used to purchase a home for your parents, which I cover in detail on Vocal.Media.

Additional Helpful Home Buyer Resources:
If you are looking for help answering some of the most common real estate questions home buyers have, take a look at this post by Sharon Paxson. Should you buy or rent? Should you hire a real estate agent? What is an earnest money deposit? Those questions and more get answered!

Closing costs are a part of every home purchase and that money will always be on top of any down payment requirements (buyers) or commission (sellers). Knowing those costs and budgeting for them is the best way to avoid any unwanted surprises at the closing table. This post by Kevin Vitali goes through the most common closing costs that can be expected for both the home buyer and seller!

Is using a local real estate agent a smart idea? Vicki Moore writes about 8 ways an out-of-state agent can cost you more money. Learn why in the insightful post.

If you’re getting a mortgage, understanding what a loan commitment is, where it falls in the loan process, and what it means are all answers you should absolutely know! Take a look at this article by Joe Boylan to find out everything you need to know about loan commitments!

About the author: This article on How To Buy A Home For Your Disabled Adult Child was written by Luke Skar of MadisonMortgageGuys.com. As the Social Media Strategist, his role is to provide original content for all of their social media profiles as well as generating new leads from his website.

Providing award-winning customer service to clients who need to purchase a home or refinance an existing mortgage in Alaska, Alabama, Arkansas, Arizona, California, Colorado, Connecticut, District of Columbia, Delaware, Florida, Georgia, Iowa, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Mississippi, Montana, North Carolina, North Dakota, Nebraska, New Hampshire, New Jersey, New Mexico, Nevada, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Virginia, Vermont, Washington, Wisconsin, West Virginia, and Wyoming!

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Luke Skar About Luke Skar

Luke Skar is a 17+ year veteran to the mortgage industry. He strives to stay up to date with the latest changes and trends in mortgage lending as well as real estate. Through his blogs, websites and social media accounts, his goal is to help the community with as much factual knowledge as possible that helps all parties in real estate transactions.