The Family Opportunity Mortgage Is Great. Here’s How It Works.

The Family Opportunity Mortgage is a great way to purchase a home for a family member. We’ll explain how this little-known mortgage product works and the basic qualifying requirements you’ll need to meet.

What is a Family Opportunity Mortgage?

The Fannie Mae Family Opportunity Mortgage program is a type of conventional (non government-backed) home loan that enables you to purchase a home for a family member with owner-occupied pricing and lending requirements even though you don’t plan to live in the home.

In the past, if you wanted to purchase a home for your aging parents, it would be considered investment property – whether you collected rent or not. Investment property mortgages are considered riskier from a lending standpoint, so they have higher rates and fees and larger minimum down payment requirements than owner-occupied mortgages.

The Family Opportunity Loan is considered owner-occupied financing even though you don’t plan to live in the home. This means you can purchase a home for aging parents or disabled adult children with financing terms that are more attractive than what was available in the past.

Has the Family Opportunity Loan Been Discontinued?

There have been rumors that the Family Opportunity loan has been discontinued. Are far as we know, this is not the case. The Family Opportunity loan is alive and well as of this writing.

Lower Rates and Costs

There’s no downside to using the Family Opportunity loan to purchase a home for a relative.

It’s not even a new loan product, really. Fannie Mae simply took the existing owner-occupied lending guidelines and applied them to a loan scenario where somebody buys a home for an aging or disabled family member.

What was once considered an investment property mortgage is now an owner-occupied mortgage, which offers some nice advantages:

• Lower interest rates and costs – You can purchase a home for a family member with owner-occupied pricing, which is typically much more attractive than investment property pricing.
• Lower down payment requirements – The minimum down payment for an investment property is typically 20% to 25% of the purchase price. The Family Opportunity Loan offers a minimum down payment of just 5% of the purchase price.
• Less stringent lending requirements – Investment property mortgages are considered riskier, so they have more stringent lending requirements for credit scores, debt-to-income ratio, and cash reserves. A Family Opportunity Loan is essentially an owner-occupied mortgage, so it’s much easier to qualify for than an investment property mortgage.

Current Interest Rates

Check out the table below for the latest conventional purchase mortgage rates – which also apply to the Family Opportunity loan. You can also search FHA and VA interest rates, if you like.

Want to see more options? Check all mortgage rates here

How to Qualify

Qualifying works exactly the same way as it does for a regular owner-occupied conventional loan. Here are the basic Family Opportunity Mortgage requirements:

• Minimum 620 credit score – Ideally, you want your scores to be at least 700 for the best interest rates and closing costs. However, you can potentially qualify even if your scores are as low as 620.
• Minimum 5% down – The minimum down payment is 5% of the purchase price, but it comes with private mortgage insurance (PMI). You’ll need to put down at least 20% to avoid PMI.
• Stable income history – You’ll need to document the last two years of your income and employment. It’s OK if you’ve changed jobs as long as you show steady employment in the same field. Self-employment is also typically OK, but you’ll need to provide two years worth of personal and business tax returns.
• Maximum 45% debt-to-income ratio (DTI) – You may be able to slightly exceed 45% with strong credit scores and documented liquid assets, such as savings or retirement accounts.
• Proof of income for your relative – You’ll need to prove that the family member for whom you’re purchasing the home can’t afford the home on their own. You can typically prove income with W2s, paystubs, Social Security Benefit Statements, pension award letters, etc.

Your lender may also ask you to provide a written statement explaining your intentions for the new home. In other words, you’ll need to provide a statement in writing that you intend to purchase the home for a relative to live in.

All the standard conventional mortgage products will likely be available, including 30-year fixed, 15-year fixed, 10-year fixed, 10/1 ARM, 7/1 ARM, and 5/1 ARM.

What’s the Downside?

There really isn’t a downside to this type of loan because it’s really not a new loan product to begin with. Fannie Mae simply applied the owner-occupied lending guidelines to a loan scenario where somebody purchases a house for a relative.

Prior to the change, you would have to buy the home subject to investment property (or non-owner occupied) loan terms, which typically come with higher rates, down payments, and loan costs.

The Family Opportunity loan enables you to purchase a home for a relative with essentially the same loan terms you would get for a home you live in – even though you don’t plan to personally live in the home.

Frequently Asked Questions