Help Buying a House for an Adult Child with a Disability

Parents sometimes need help buying a house for a child with a disability. Fortunately, there are a number of resources that provide help when buying a house with a disabled child. Here are a couple items to consider when exploring your homebuying options.

• Generally, at least one borrower on the loan needs to be occupying the subject property for it to be considered “owner occupied” or their “primary residence.” This is important because financing terms are always much better when the property is a borrower’s primary residence. However, there are some scenarios where both Fannie Mae and Freddie Mac considers a residence to be a primary (owner-occupied) residence even though the actual individual on the loan will not be occupying the property.
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  -- The first type of scenario is when a parent or legal guardian is providing housing for a 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/legal guardian is considered the owner/occupant, and therefore can get the better rate and terms of the home being a primary residence.
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  -- The other scenario is the exact opposite – a child can provide housing for a parent. If the parent is unable to work or does not have sufficient income to qualify for a mortgage on their own, the child is considered the owner/occupant.
  
  In both scenarios, Fairway will request a detailed letter of explanation for the loan file that explains the reasoning for the parent/child to finance the subject property to ensure that it meets the loan program guidelines.

Learn more about your options. Start here.

Ways to buy a home with a child who has a disability

If you have an adult child who has a disability, you know there’s a daily balancing act. On the one hand, you have to be involved in your child’s life to provide care and guidance. But on the other hand, you want to help your child gain a sense of independence when possible.

Owning their own home is one way to help foster independence for adult children who can live on their own. But they may need some financial and logistical help to achieve that milestone. Fortunately, a variety of mortgage loan programs provide help to buy a house with a disabled child.

Family Opportunity Mortgage

Mortgage lenders typically charge higher interest rates — and they require bigger down payments — when you’re buying a home for someone else. That’s because in most cases, second homes are vacation or investment properties, and these are considered riskier purchases than a primary residence.

The exception is when homeowners buy a second residence for an adult family member. Eligible homebuyers may qualify for the Family Opportunity Mortgage, which is a Conventional mortgage loan.

The Family Opportunity Mortgage allows you to purchase a home at “owner-occupied” guidelines and rates even if you do not plan to live there with your child. That means a lower down payment and likely a better interest rate than you’d pay if you simply purchased the property as a second home.

To qualify, you’ll need to meet the following criteria:

• The person who will live in the home has a disability.
  -- In this scenario, “a parent or legal guardian is providing housing for a handicapped or disabled adult child,” explains Andy Nolte, a Fairway loan officer in Leawood, Kansas. “If the child is unable to work or does not have sufficient income to qualify for a mortgage on their own, the parent/legal guardian is considered the owner/occupant – and therefore can get the better rate and terms of the home being a primary residence.”
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• The person who will live in the home doesn’t earn enough money to qualify for the loan by themselves.
  -- The Family Opportunity Mortgage also works if an adult child wishes to buy a home for a parent. “If the parent is unable to work or does not have sufficient income to qualify for a mortgage on their own, the child is considered the owner/occupant,” Nolte says.
  
  “In both scenarios, we simply request a detailed letter of explanation for the loan file that explains the reasoning for the parent/child to finance the subject property to ensure the sentiment of the policy is met,” he explains.

You will also need to meet the loan requirements, including having a credit score of 620 or higher and making a down payment of at least 5%.

Learn more: Family Opportunity Mortgage: Buy a Home for Elderly Parents or an Adult Child With a Disability

Co-signing on the loan

Another option for help to buy a house with a disabled child is to co-sign their mortgage loan. When you co-sign a loan, the lender will consider your income, credit history, and debt-to-income ratio* (DTI) along with your child’s. If you have a high credit score, low DTI, or solid income, that may strengthen the loan application and help them get approved.

Since your child, who will be occupying the home, will be the primary borrower, you won’t have to worry about the higher down payment requirements and higher interest rates associated with second homes.

In addition, since the home will be your child’s primary residence, they may qualify for a low or zero down payment loan, such as a 0% USDA** or VA*** loan or a 3.5% down FHA loan. Conventional loans also have a low down payment option of 3% for eligible borrowers.

As a co-signer, you are not listed on the title to the home, but you are responsible for the mortgage payments if your child is unable to make them.

Co-borrowing with your child who has a disability

If you plan to live in the home with your adult child who has a disability, you could become a co-borrower on the mortgage loan.

As a co-borrower, your credit score and income could strengthen the loan application, allowing for a lower mortgage rate or a lower down payment requirement. Co-borrowers are considered co-owners of the property, so you will also be on the title to the home. As with co-signers, co-borrowers are also responsible for ensuring that the mortgage loan is paid.

USDA loan with income deductions

If you are buying a house in which you plan to live with your child, you might consider a 0% down USDA loan. USDA loans are available in designated rural and suburban areas and eligibility is based on income.

To qualify, your lender will verify that you earn at or below the income limit for your area. Note, however, that your qualifying income is based not just on your earnings, but on your eligible deductions as well. Those deductions include medical expenses for a dependent household member.

For some borrowers, these deductions can be the difference between earning too much and falling within the USDA’s income limits.

Learn more: USDA Loans: A Zero Down Loan for the Suburbs

Assistance programs that provide help to buy a house with a disabled child

It’s not unusual for caregivers to develop a can-do attitude. Spending so much time appealing to insurance companies and advocating for the rights of people with disabilities can have that effect. But when it comes to buying a home for your adult child who has a disability, you don’t have to go it alone. A variety of programs can help.

Down payment assistance

Saving up for a down payment delays homebuying for a lot of people. But down payment assistance (DPA) grants and loans can help.

DPA comes in several forms and from many local sources, including city or county governments, local non-profit agencies, and state housing finance departments.

Learn more: Down Payment Assistance: 50-State Guide to Homebuying Programs (With Map)

Gifts from friends and family

Most loan programs let borrowers use money donated by friends or family members to make the down payment and pay closing costs.

Be sure to tell your loan officer upfront if you’d like to use gift money since the money has to be documented properly.

Learn more: Can I Get Financial Assistance to Buy a Home?

Voucher programs

The Department of Housing and Urban Development, better known as HUD, funds an affordable housing voucher program to help defray the costs of homeownership in many areas.

Check with your state’s public housing office to find out what’s available.

Local and disability-specific programs

A quick Google search can give you an idea about local homebuying programs in your community. Also, some foundations exist to help people with certain disabilities buy properties and make home improvements to enhance accessibility.

Programs to help make a home accessible for a disabled adult child

If you’re buying a fixer-upper — or if you already own a home but need to make home modifications to customize it for your adult child’s disability — you can find some help for this, too.

• The USDA offers grants and loans to help make homes more accessible. To qualify, the household can’t earn more than half of the area’s median income.
• The Department of Veterans Affairs can help fund home adaptations for veterans who need to make their homes more accessible.
• Non-profit organizations in your area may be willing to help, especially with smaller adaptations such as building a ramp or installing other accessibility fixtures.

It never hurts to ask your loan officer, real estate agent, or local housing counselor if they know about any programs that can help.

Help to buy a house with a disabled child FAQs

Can disability income be used to qualify for a mortgage?

Yes, mortgage lenders will count income from Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), or a private disability insurance policy. You’ll need to show the disability payments are expected to continue at least three more years.

Can someone on disability co-sign for a house?

Yes, someone who receives disability income can co-sign on a home loan. By co-signing, the person agrees to accept responsibility for the loan if the primary borrower stops making payments.

How does disability income affect getting a mortgage?

Disability income influences loan eligibility just like any other type of acceptable income. Usually, applicants with higher incomes — along with lower debt loads and stronger credit histories — have the most loan options.

The bottom line on help to buy a house with a disabled child

There are a number of options for buying a house with a child who has a disability. A conversation with a loan officer who is knowledgeable about different mortgage loan programs and options can help you determine the right plan for your family.

Start the conversation here.

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*Debt-to-income (DTI) ratio is monthly debt/expenses divided by gross monthly income.

**USDA Guaranteed Rural Housing loans subject to USDA-specific requirements and applicable state income and property limits.

***A down payment is required if the borrower does not have full VA entitlement or when the loan amount exceeds the VA county limits. VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits. Eligibility subject to program stipulations, qualifying factors, applicable income and debt-to-income (DTI) restrictions, and property limits.

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