Parent-Child Mortgage Program
Family Opportunity: Buying a Home For a College Student or Disabled Child or Parent
If you want to buy a home for a relative, it should be easy, right?
The problem is traditional lending guidelines work differently when you purchase a home that you don't personally occupy -- even if a relative occupies it! This is considered to be a "non-owner occupied" purchase.
What does that mean for you? It means significantly worse pricing (higher rates and costs) and strict down payment requirements.
But from an intuitive standpoint, purchasing for a loved one is not the same as purchasing a rental. The dynamics are different. The risk shouldn't be as high. I'm guessing your loved one won't be a high-risk tenant. I assume you're not going to "walk away" from the property like some landlords because it doesn't "cash flow".
So, there's a dilemma... And that's origin of our parent-child mortgage program.
The parent-child mortgage program provides optimal financing under special circumstances. In these situations, you're able to avoid the disadvantages of non-owner occupied financing.
Situations for the Family Mortgage Opportunity Program
Unfortunately, the program does not apply to every situation where you're helping your family. In fact, the situations are rather limited, as described below. However, I have personally been involved in a transaction where we received an exception on one of the details. We'll come back to that. Basically there are three situations where the program can apply:
1. Purchasing for a disabled child
This program allows a parent to purchase on behalf of a disabled child with favorable financing and a minimum 5% down payment. Here are some of the special requirements --
Parents purchasing a primary residence for a disabled son or daughter who is unable to work or has insufficient funds to qualify for a mortgage
Disabled adult child must be unable to work OR have insufficient income to qualify for a mortgage on his or her own.
The parents must provide a letter of explanation outlining the intent to purchase a home for their physically-handicapped or developmentally-disabled adult child who is financially limited
Disabled adult child will occupy the subject property as his or her primary residence
Parents may already own their own primary residence
Assisting a disabled adult child has no distance requirements on where the adult child’s primary residence is located
The parents and disabled adult child can both apply for the loan, but the parents are the primary source of qualification. The disabled adult child is not required to be on the loan
Title must be in the borrower's name, but the disabled adult child may also be on the title
If this situation applies to you, get in touch with us. If you're searching for a home within the next three months, your first step is to complete the information at Get Started Online.
2. Purchasing for an elderly parent
This option also allows a minimum 5% down payment.
Adult children purchasing a primary residence for elderly parents who are unable to work or have insufficient income to qualify for a mortgage
Elderly parents must be unable to work or not have sufficient income to qualify for a mortgage on their own. The adult child must provide a letter of explanation about the intent to purchase a home for elderly parents who are financially limited
The parents will occupy the subject property as their primary residence
The adult child may already own his or her own primary residence
Assisting an elderly parent has no distance requirements on where the adult child’s primary residence is located
Property will be considered like a primary residence
The parent(s) and adult child can both apply for the loan, but the child is the primary source of qualification. The parent is not required to be on the loan
Title must be in the borrower's name, but the elderly parents may also be on the title
3. Purchasing for a child in college
This program provides favorable financing and requires a minimum 10% down payment. Here are some of the requirements:
College-enrolled students residing in a second home residence purchased by their parents
Only single family residences (condos OK). No duplexes or multi-family homes.
Child must be enrolled in university/college (documentation of enrollment is required)
Property must be within a reasonable distance of the university (close to the university)
Property must be a reasonable distance away from the parent’s home (not too close to the parent's home) in order to be classified as a true second home. The subject property can provide the parents a place to stay while visiting the campus, but it will be the child’s primary residence
For a minimum of one year, the property cannot be rented out
For a minimum of one year, the property must be occupied by the child of the parents who own the property
The parents may not own additional second/vacation homes in the same locale
A letter from the borrower describing the purpose is required
Parents will apply and qualify for the loan. The child is not an applicant and does not factor into the qualifying for the mortgage
Parents own the property. If the child is of legal age, the child may join the parents on the title, but it is not required
Let's Work Together
As you can see, we offer many options most lenders don't offer and rarely discuss. Our commitment is to help you explore the options that can best fit your personal situation.
Equally important, we'll give you a distinct advantage for getting your offer accepted. When the seller's Realtor sees we're providing your financing, it inspires confidence because of our strong reputation in the local real estate community.
On top of that, we can give you a bona fide head start through our VIP FasTrak program. When multiple buyers are competing for a home, you'll stand out from nearly everyone else who's at a much earlier stage in the mortgage process. You'll offer more confidence, more reliability, and if you want, a faster closing to the seller.
Your first step is to complete the information at our Get Started Online portal so we can get to know you.
What About Other Situations?
The options above are already exceptions carved out from normal guidelines. So, there is not much flexibility for additional exceptions.
However, I worked on a transaction once for grandmother who wanted to purchase on behalf of her disabled granddaughter. The grandmother was the primary caretaker for the granddaughter. Although the situation was not spelled out in the guidelines, it was deemed to be "in the spirit" of the guidelines. If you have a special situation like this, we can look at it.
There are also ways to help a loved one such as co-signing for them on an FHA Mortgage.
Frequently Asked Questions
Q. Can someone on disability (or SSI or SSDI) get a mortgage alone -- without the help of family?
A. Yes! We provide mortgages to many people on disability income. However, people with disability sometimes face challenges with debt-to-income ratio due to fixed income. Our family opportunity program may be able to help in this case.
Q. What if my child is NOT disabled and NOT in college?
A. In that case, there are other ways you could potentially help them. Instead of purchasing the home for them, you may be able to co-sign for them through an FHA Mortgage. Get in touch with us to explore your options.
Q. Can multiple siblings join together to purchase a home for our elderly parent?
A. Yes, this is possible.
Q. Can my child assume the mortgage once he or she graduates?
A. After your child graduates, it may be possible for him or her to purchase the home from you with a new mortgage. If you want an option for them to assume the mortgage, you could consider instead starting as a co-signer for them on an FHA Mortgage. If they're able to qualify on their own in the future, they could assume the mortgage from you.
How Can I Get More Information?
With any special program, it's even more important to plan and prepare. Here's how you can get more info...
If you're targeting a purchase within the next three months, the clock is already ticking! Complete the information at the Get Started Online page.
If you're targeting a purchase beyond three months from now, you can use the contact form below.
I'm beyond three months away, but please give me a call to help us plan and prepare!
I'm outside Wisconsin, but your info and programs are interesting! Please put me in touch with a colleague who serves my area!