Debbie Lentz has worked with many families to get the right loan for their multi-generational home purchases. Lentz, vice president of mortgage at Union Bank & Trust in Omaha, is seeing this situation come up more and more with the high cost of nursing homes and medical care as parents age.
Sometimes, a multi-family home is a great idea financially, conveniently and emotionally.
“But talk over carefully the reasons why you are considering a multi-family home,” she says. “It’s a great time to talk about each family’s financial stability, credit scores, employment, debt, judgments, collections, bankruptcies and more.”
She always discusses why a multi-family home would work, and why it would not work. Also, she figures out why each family is considering living all together.
“It is important that each family is aware of what is being expected, as well as how well they get along while spending time together,” Lentz adds.
Some educational studies have shown that a single parent home with a grandparent or grandparents living in the home have better success at school. Aging adults with increasing health issues are able to have more security knowing that they are not living alone, she says.
Understand this is getting more common
“This situation is increasing every year. In the past in the 1940’s, it was a very common arrangement, but recent generations have moved away from multigenerational living,” Lentz says. “It is back, and that’s a good thing.”
The key factors for that phenomenon include:
- Children are marrying later and living at home longer
- Parents are living longer and needing increased health care as they age by family members
- Economic factors with debt increasing and income being limited with child care expense, medical needs and more;
- Lower expenses on maintaining one household shared by two or three families vs. two or three separate households.
Meet with a lender
After gathering all the financial information you’ll need, such as whose income, employment, retirement, debt and assets, it’s time to meet with a professional mortgage lender. Talk about what the needs are for the home and how the home will be used, plus how many members will be used on the mortgage.
Find the right lender
You should seek a lender that offers all the available programs and experience in determining the best way for the families to obtain a mortgage that best fits their needs, Lentz says. With all the programs available, go to a lender that has a full arsenal of products so you can obtain the best loan for your specific situation.
The best way to find out what programs a multi generational family – or anyone – qualifies for is by setting up an appointment and going in to talk to a lender. This is normally a totally free discussion and allows the borrowers to disclose all their personal financial needs and situations. The lender can advise the best programs to use to aid them in a successful mortgage and purchase.
Discover the advantages
Lentz explains that one of the biggest advantages is that you can qualify for a higher mortgage than you would by yourself, allowing you to purchase a home better suited for you and your other family members’ needs.
A few other pluses include:
A higher price point can increase the number of homes you qualify for
You are only paying property taxes on one house
You are only insuring one house
“There are some builders building developments for multi-families,” Lentz says. “Some programs have income limits to help those who have limited income.”
Learn your deterrents
All borrowers’ debts are considered, so someone with high debt may not help you purchase a home, she says. Credit must be satisfactory to qualify for a mortgage on any one whose income and debt are used. A borrower has to have satisfactory income sources, such as employment, pension, retirement, alimony, child support and more.
Compare different loans
With your experienced lender, look at many loan options. Don’t overlook FHA and VA loans, which can work well in the right situation, Lentz says.
One program designed to help is FNMA Home Ready. It takes into account household income of other household members if it is 30% of the borrower’s income. This helps those that may not have previously qualified on their own for a home in a desirable neighborhood. Now with the additional household members’ income, they may. This program only requires that the borrower be on the mortgage.
FNMA Home Ready is a National Program that is available by trusted lenders in their individual communities. Be sure to contact a lender that offers all programs.
USDA loans with its zero down payments can also be a choice. These loans are given for homes in rural areas plus some suburban areas of metropolitan cities.
Look for financial help
Family members can help with a gift to the borrower if the borrower is short on funds to purchase, especially if parents will be living with them. A family member may also help pay off debt that the borrower has to be able to qualify for a mortgage if this is creating a qualification issue. Also, many down payment and closing cost assistant programs are available regionally, locally and nationally for those that qualify.
“I would just really stress the importance of talking to a financial expert before selling their homes and thinking they can do something a certain way,” Lentz states. “It is so important to know that they have an acceptable plan and what course to take.”
There is nothing harder than meeting parents that have sold a home and then find out they cannot purchase or move in with other family members and purchase a home together.
“Most the time it will work one way or another, but it is best to know before the plan is in motion,” she adds.