A frequent question we receive is why do lenders tell me that I have to get an investment property loan when I am simply purchasing a home for my parents?
If you have struggled with this problem please read the following article from our co-founder.
By Scott Bialek, Co-Founder of Hurst Lending
It’s no secret that home buyers can get the lowest rates when they purchase a property that they actually plan on occupying themselves. The industry refers to these home purchase loans as “owner occupied”. However, what many people don’t realize is that there is a scenario that will allow you to get owner-occupied rates, even if you aren’t going to live on that property yourself. We’re talking about a Family Opportunity Mortgage.
A Family Opportunity Mortgage is available when someone is purchasing a home for their elderly parents. What’s great about underwriting like this is the parents don’t actually have to be on the loan.
Of course, it is worth pointing out that there are stipulations in place that you must meet in order to qualify for a Family Opportunity Mortgage. Those stipulations may vary, but usually revolve around the elderly parents having insufficient income to purchase a home themselves, and/or the inability to work to obtain an income that would allow them to qualify for a mortgage on their own.
A Family Opportunity Mortgage allows you the opportunity to purchase a property for your parents with the same rates, low down payment options that come with obtaining a mortgage for a house you would live in yourself. Again, don’t worry, you don’t have to live with your parents to get these benefits.
This is hugely advantageous because if you don’t use a Family Opportunity Mortgage, but still want to buy your parents a house, it will have to be purchased as a second home or an investment property. As you may know, those types of property purchases have a whole host of unique stipulations. For example:
- Second homes are usually required to be a certain distance from your primary home. This can be a problem if you were hoping to have your parents live nearby.
- Investment properties generally require a much higher down payment than a primary home. This can be a huge problem if you don’t have large cash reserves on hand.
- Investment properties tend to get higher mortgage rates than primary homes.
As the cost of assisted living facilities continues to rise, it’s not unreasonable to find yourself in a situation where purchasing your parents a home is more affordable than finding a facility for them to stay in. Astonishingly, this can even hold true when you factor in the cost of at-home care as well. If you find yourself in that situation, you should seriously consider utilizing a Family Opportunity Mortgage. It could be the difference between being able to afford a home for your parents or not.
The reality is that everyone is in a situation that is unique to their family and lifestyle. A Family Opportunity Mortgage can be the perfect scenario for some people, but not all. Take the time to do your research and find the mortgage that works for you and your family. It never hurts to speak with a professional. If you are in the market for a new property, we encourage you to reach out by visiting www.hurstlending.com.
About Scott Bialek
In addition to being one of the founders of Hurst Lending, I am also an attorney and real estate investor. I have a portfolio of residential and commercial properties. I love helping investors build their portfolio and I am happy to help provide advice and suggestions on how to make money investing in real estate that go well beyond what a typical lender can provide. My philosophy is to take advantage of the current, still relatively low, interest rate environment to build a portfolio of high-quality real estate that will pay off over the long term.
Please feel free to contact me directly if I can help provide a loan for your next purchase or refinance, or even if you just want advice on how to get started or expand your real estate investing activities.
Scott E. Bialek
Co-Founder, Hurst Lending
*Please note that this article is not intended to provide legal advice. You should contact your own attorney to understand the legal protections that are available to you when you purchase real estate.