A study released by the Joint Center for Housing Studies at Harvard University in 2023 highlights a growing problem for seniors in the United States: housing affordability. The authors of this study use a metric called the housing cost burden – the percentage of their income needed for housing – to measure affordability. The study considers households to be “cost burdened” if their total housing related expensed exceeds 30% of their income; the number of senior households that are cost burdened rose to 11.2 million in 2021, the highest rate on record. Not surprisingly, the problem is particularly acute for low income and minority retirees.

One initiative that addresses this issue is the Fannie Mae Family Opportunity Mortgage, designed to provide housing solutions for parents or disabled children. This innovative program is focused on borrowers seeking to provide housing for their parents, especially when parents are unable to secure a mortgage due to insufficient income or other constraints. The program allows the borrower to be considered the owner-occupant, even if they don’t plan to reside in the property themselves. This distinction brings numerous advantages, including improved pricing, reduced down payment, and lower closing costs, making homeownership more accessible and affordable for families in need.

The basic borrower requirements to qualify for this program are as follows:

• 620 minimum credit score.
• 45% maximum debt-to-income ratio.
• Steady employment and the ability to support your own housing costs as well as those of the new mortgage.
• The parents or adult child can’t afford the home on their own.

Importantly, the Family Opportunity Mortgage eliminates the requirement for borrowers to purchase a home for their parents as a second home or investment property, potentially saving them thousands of dollars. This financial relief is particularly significant given the rising costs of long-term care or assisted living facilities, providing a cost-effective alternative for parents and their children.

One of the most notable features of the Family Opportunity Mortgage is its flexibility regarding distance requirements. Unlike traditional second-home loans, this mortgage allows parents to purchase a property next door or across the street from their children, facilitating close proximity for caregiving and support—a substantial advantage in times of need.

Furthermore, the Family Opportunity Mortgage extends its support to parents or legal guardians seeking housing for their handicapped or disabled adult children. In such cases, if the child is unable to secure a mortgage independently, the parent or legal guardian can be considered the owner-occupant, paving the way for independent living and financial stability.

It’s worth noting that Freddie Mac offers a similar product, providing additional options for parents and children seeking owner-occupied financing solutions. With both Fannie Mae and Freddie Mac offering such programs, families have a range of options to choose from.

For further information, refer to Fannie Mae’s Selling Guide here and Freddie Mac’s guide here.