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Purchasing home for/ with elderly parent

Are there programs that would allow a mortgage on a second home to be considered owner occupied even if elderly mother lived there? Home is next door to us.  Excellent credit.  Offer price would be 140k to 145k.  Can afford 10k to 14k down including closing. Mother could be on mortgage but not deed because she may have to go to assisted living in a few years.  She could pay market rate rent while she was living there.
  • July 18 2010 - Zillah
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Answers (8)

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now we have real estate salespeople giving mortgage advice; which in itself isn't so bad except that the  advice is terribly incorrect.

so, at the risk of sounding like a broken record:

1. Fannie Mae allows it
2. It can be next door
3. It can be treated as owner occupied in this scenario
4. Keep Mom off the deed and mortgage
5. Elderly (key word being elderly) Mom will have to show she has insufficient (i.e. a fixed) income to buy a home


  • July 18 2010
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Julie - Norm and Andrew are correct.  

You can find info on Page 229 of Fannie Mae Selling Guide.

Wells Fargo is primarily a Freddie Mac lender.   I'm not sure if they specifically allow this or not, but it is certainly widely available.  
  • August 03 2010
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I wouldn't give mortgage advice without consulting with my lender first. Direct quote from a lender with over 20 years experience at Wells Fargo Home Mortgage:

"First, you cannot buy the home next door to you with 10% down (which is what dljorgen said he had for down payment) as an owner occupied unless it is larger, you personally intend to occupy it, and you can qualify for both mortgages..... the only way is to have Mom on the loan as a co-borrower. Second, if Mom is on the mortgage, she must be on the deed."

I guess it may vary from lender to lender (possibly from state to state with the deed issue?), but these are Wells Fargo guidelines, which I assume are pretty standard for most of the larger banks. There may be a loophole, as Dan addressed, by putting it in a trust or using the Medicaid program.... Sounds like it would be a viable option worth looking at for your situation.

If there is a way to sidestep the above guidelines, I would love to know about it too... as I find I have clients in this same situation often. Please post links to various programs if you have them or know of any.

  • August 03 2010
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You need an estate planning attorney to help you with your real concern ... Medicaid Spend-down. Your Mother's concerns about not having her name on the deed to the property is prudent.

I am a licensed insurance agent and offer long term care insurance. You need to see if your Mother qualifies for this. I will get to how to qualify and deed the home, as I am also a licensed loan originator, after sharing a few things with you.
 
The costs for private long term care are $5000 to $6000 monthly on average in most States. The average length of stay is 857 days. Medicaid requires that a person's assets be used first (down to less than $2000) before they can obtain care from a Medicaid approved facility.

Many States have "Partnerships" with insurers and if your Mother chooses this type of coverage, her assets can be completely or partially protecetd from Medicaid Spend-down. A proper long term care policy will protect against financial liquidation and poor health care options.

Now the home ...

First, you do not have to buy the home as a rental or investment property. This is an option at a 1/2% higher rate and with 15%-20% down payment. You would be financing the purchase yourself with this option, and the down-payment would have to come from you.

If your Mother qualifies with her own credit, down-payment, and income, she can have you on the deed and she can sign the "note" (your ownership and her liability). Her down-payment also could be subject to the 5-year look-back rules under Medicaid Spend-down.

(She is allowed to gift $10,000 annually; so over 2 years, that is $20,000 to provide to you to use as down-payment and reimbursement for additional down-payment and settlement costs paid by you.)

If she does not qalify on her own merrit, you can jointly apply (as a non-occupant coborrower) with her, using your income and down-payment (as long as her credit qualifies) jointly with hers. She must reside in the home either way but you do not have to (joint liability with your ownership).

FHA will finance either of these options under owner-occupied rates and terms with only 3.5% down. And the seller can pay up to 3% of the sales price toward the settlement costs.

The other option is to consider putting the home and her other assets into an irrevocable living trust (once established, it can never be changed).

Check with your attorney and a title company about titling laws in your State and how to arrange assets and liabilities in conjunction with insurance if an option.

Hope this helps!
  • July 19 2010
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Norm is 100% correct.  Under the same guideline a parent can purchase a home for a disabled child that is unable to pur chase on their own.

This situation seems to be a little different the parent appears to have the means but they do not want the home in the parents name if and when they end up in assisted living.  You may get caught on Norm's No. 5.  You will also have to work with a direct lender, most lenders have overlays and ignore that guideline.
  • July 19 2010
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If the home is next door to you, and you finance it with the intention of "renting" it to your mom, it is considered an investment property. Therefore you will pay higher interest, and may need more down.... there is no legal way around that. It must be a certain distance from your primary residence to be considered a vacation/2nd home. Also, there's no way for you to finance it, and not be on the deed.

Seems to me your best option is to have Mom finance it, and add your name to the deed later (she will still be on it unless she "sells" the home to you)... but the ability to do that may be state specific. My lender will be able to answer that, or you may find the answer on www.hud.gov. Hope that helps :)

Feel free to contact me if you have further questions.
  • July 18 2010
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If you want to talk directly to a lender feel free to contact me directly anytime
  • July 18 2010
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Fannie Mae allows it so any Fannie Mae lender would be able to offer it. Your mother wouldn't have to be on the deed or on the mortgage. She would have to provide proof that her income is insufficient to be able to get a place on her own.

  • July 18 2010
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