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Little-Known Mortgage Option For Family Members Who Couldn't Qualify on Their Own

Thinking of purchasing a house for a disabled adult child or parent?

Are you unable to qualify for a mortgage due to a disability?

While this program no longer has a brandable name, it’s the perfect fit for specific borrowers.

Let’s set the stage with my scenario:

Currently renting, my prospective client wants nothing more than to be a homeowner. Disabled from a young age, the sense of independence that comes with homeownership has become rare air. The problem? Never enough income to qualify.

A couple of sentences in Conventional guidelines make a world a difference for prospective homebuyers with disabilities:

Fannie Mae will consider the residence to be a principal residence even though the borrower will not be occupying:

  • Parents or legal guardian wanting to provide housing for their handicapped or disabled adult child

  • If the child is unable to work or does not have sufficient income to qualify for a mortgage on their own, the parent or legal guardian is considered the owner/occupant.

Notice how they use the term “adult child?” The disabled occupant can’t be a minor.

In that same vein, determining legal agreement competency must be addressed. When a party to the purchase contract is mentally disabled in a manner that disqualifies their competency in entering legal agreements, he/she is ineligible to sign purchase and mortgage documents.

Back to my scenario:

This disabled adult has family that is glad to help out, but dropping a 25-30% down payment for an Investment Property gets far too expensive. Add Conventional pricing adjustments (LLPAs) to the closing costs and the well-intended family member’s idea gets even further out of reach.

This is the perfect example scenario for this program, so talk to a lender about adapting yours, and make sure that they have experience with this sort of transaction. There are particular nuances about the loan application that must be observed for smooth sailing and meeting purchase process deadlines.


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