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Introduction: Welcome to the Homeownership Insights Podcast, your leading mortgage podcast, sponsored by Fairway Independent Mortgage Corporation. Listen as experts from across the country share knowledge to help homebuyers and homeowners make the best decisions in their homeownership journey. Our next podcast begins right now.

Casey Morris: Welcome back to the Homeownership Insights podcast. I'm Casey Morris, and today I'm talking with Fairway Loan Officer Phil Vollmer about what parents can do when they want to buy a home for an adult child who has a disability. So, Phil, thanks so much for being with me.

Phil Vollmer: Oh, my pleasure. Thank you for having me.

Casey Morris: Absolutely. So, before we get into the meat of the topic, I was hoping you could share a little bit about your background as a loan officer. And I know you also volunteer with a special needs community. So, I think that you're an ideal person to talk today about, you know, the opportunities and options and challenges that parents may face when wanting to buy a home for an adult child.

Phil Vollmer: Sure. Glad to. So, I have been a loan officer for 19 years with Fairway for close to eight years. And locally, in our community here in State College, I volunteer for a social services organization nonprofit called Strawberry Fields. They provide services and, in many cases, housing also for special needs folks, whether it's handicapped, disability services, and actually live and help. I volunteer on their board of directors and have for 11, almost 12 years.

So great organization and much-needed. Let's put it this way. The community doesn't have much of a voice when you really get to, you know, state and federal advocacy. So, it really needs it, and it comes down to what local communities can do for the folks that fall into that category, because it gets pretty easy to pass them over, I'm afraid.

Casey Morris: Right. Yeah, unfortunately. And that's why I'm so glad that we're talking about this topic and, you know I wanted to explore not just what homebuyers can do based on their own finances, but a little bit later on, we can talk about how do you find some of those community resources to help people find the housing that they need or to renovate a home to make it more accessible and more comfortable and safe for themselves. So, yeah, I think this is an important topic. I'm glad we're talking about this.

Phil Vollmer: Yeah.

Casey Morris: So I thought we could get started, if you could just talk about some scenarios in which a parent might want to purchase a home for or with their adult child who has a disability, you know, what are some scenarios you've seen or instances where somebody might kind of be thinking about that, you know, as a long-term housing solution?

Phil Vollmer: Sure. It's a very prevalent problem or, you know, in some cases, opportunity. More often than not, a lot of folks that are in the disabled community will either be directed through social service organizations or even their caretaker folks to a group home. And, you know, group homes are a great solution. In fact, that's one of the things that the nonprofit that I volunteer for is providing is this group home environment.

That's, you know, it's a two-edged sword. There's lots of great things that happen in group homes. And depending on the situation, there also can be high turnover for the direct care professionals. And to be honest, coming out of the pandemic, that is probably one of the biggest issues that faces social service organizations across the country, not only for disabled folks, but for almost all walks of these social services that are in need is the direct care folks are you know, they can go to a local convenience store and get a job that pays three or four or $5 more an hour, have more flexible hours, and not have to work overnights.

So, it's really a big deal. And finding good folks that understand the mission and want to serve that community and can stay with it for a long time. It's a lot of very hard, demanding, physical and mentally exhausting work.

So, when you get into that environment, a lot of times if the families have the wherewithal or the desire finding an outlet for them to provide housing for their own child that isn't subject to the group environment is, you know, it's a great niche to explore for them.

Casey Morris: Okay. That makes a lot of sense.

Phil Vollmer: So, I mean, a group home isn't the only answer, but it is typically going to be easily 75 to 80% of the solution provided by the communities. Since probably in the mid to late seventies, most of the state-provided institutions kind of pivoted away from that as essentially the way that people were sort of hiding that community. Just, you know, we just sort of tuck it away here and nobody needs to worry about it. And that wasn't really desirable from the family's standpoint. They were encouraged to seek better options.

Casey Morris: And for a family that is thinking that they want to explore another option, such as buying a home for their child, you know, what are some of the options that are available?

Because I know typically when you buy a second home, it's counted as, you know, as a vacation property or as an investment property. And so, you know, the expectations from the lender go up considerably. You're probably going to pay a higher interest rate. You need to have more money to put down, better credit, whereas buying a primary residence is obviously the most advantageous.

So, can you talk about some of the opportunities that exist that people may not be aware of, where they are able to find a house more affordably than looking at just buying a second home or something like that?

Phil Vollmer: Sure. So, there's typically two avenues to achieve this where the occupancy is going to be treated as a primary residence. The avenue that has probably the best advantage is where the parent can provide the house to their child. And the child does not have to be a borrower on the loan and also does not have to be on the deed or the mortgage on the title or deed to the home.

And there there's essentially a, I don't want to really say it's a loophole, but essentially Fannie Mae has a specific guideline that spells out a parent can provide housing for their disabled or handicapped child, even if that child is working. But they can provide housing and it's treated as a primary residence with all of the same requirements for lending purposes.

So, the minimum down payment requirement of 5%, no adjustments on the interest rate for occupancy type, you know, it's a primary residence. So that is the best option.

And since I am not, you know, an estate planning attorney, it is probably a good idea to get input from an estate planner because there could be a good reason to include somebody on the title and there could be a reason to not include.

And so, some of that may be directed by what the advice the family would get from who's handling those kinds of situations for them. And I would expect that most families that have a handicapped or disabled child, they have had conversations with somebody based on estate planning or should have long ago.

So anyway, that would be avenue number one. Conventional definitely allows that. Both Fannie and Freddie will have an accommodation for that. The other avenue would be that you can buy the house as a primary residence and just have the parents serve as non-occupant borrowers, which is a fancy way for the mortgage industry to say cosigner. And then so in that case, the child actually does have to be borrow on the loan.

They wouldn't have to be on title, but they would have to be a borrower on the loan. And in that case, if the child has a credit history and credit scores that are not detrimental, then that's also an equally good way to take that approach. Still the same minimum down payment requirement, 5% of the purchase price, and also no adjustments for a cosigner, no adjustments for a non-occupant co-borrower.

So those are the two easy avenues as far as conventional financing. FHA will also allow you to do a non-occupant co-borrower. The parent can cosign for the child and the occupancy is considered primary.

Casey Morris: Okay. And in that scenario, with a non-occupant co-borrower, would the child have to earn enough income to cover that? Or would their application be supplemented by their parent's income or assets or something like that?

Phil Vollmer: Well, yes. So, the parent's income would supplement the child's income, at least in the case of the conventional guidelines. We determine debt-to-income ratio based on the aggregate total income and divide it into the aggregate total debts. There was a time when Fannie Mae actually required in the non-occupant situation, Fannie Mae required that the occupant had to be able to at least afford the housing payment. That is no longer the case.

So right now, it's just you add up the total income on a monthly basis and divide it into the total debts. And if the ratio works, you're going to get an Approve Eligible, providing you've got the other parameters satisfied as well. And so, you know, it really depends on whether from an estate planning standpoint, if parents want the child to somehow have some stake in the game as far as being on title deed and maybe some of their age is going to be a part of that. And if there's siblings, that also could come into play.

So, the non-occupant is sort of the unique guideline for allowing a parent to buy the property for the disabled child is there's that's only one step in the relationship. As a parent, you can provide housing for your child. You can't provide housing for your grandchild.

Casey Morris: Okay.

Phil Vollmer: So the parent can provide housing for the child. And so, in a little bit of a twist, it's a little bit off topic, but also a child can provide housing for their parents that may be not eligible or able to provide their own housing costs. They don't make enough fixed income or whatever it might be. So that in reverse can be done. So, I could provide housing for my parents as a primary residence, could be right across the street from where I currently live.

Casey Morris: Okay.

Phil Vollmer: So once again, it's not really catering to the disabled community, but it's the same it's for the same reasons that guideline exists, but it can only be one step. So a parent can provide housing for the child, but could not provide housing for a grandchild. But a parent can provide housing for an in-law child.

Casey Morris: Okay.

Phil Vollmer: And then the same for the child. They can provide, like I could provide housing for my wife's parents because they are my in-laws.

Casey Morris: Okay, I see that. That makes sense. And do you have to provide any proof of the relationship or in the instance of buying a house for an adult child who has a disability? Do you have to provide any kind of documentation regarding their medical condition or anything like that?

Phil Vollmer: No. In fact, I'm not sure that's legal. What you do have to provide is a letter of explanation that's signed and dated by the borrower to just state the relationship and that you're doing this for this reason and that that's the extent of it. And that goes in the file so that, you know, Fannie Mae, when they get it, they understand that the occupancy is correctly assessed.

Casey Morris: Okay. That makes sense. Yeah. I was wondering, because I know that lenders can't ask for, you know, if somebody is using disability income to buy a house, they can't ask about the nature of the disability and that kind of thing. So I was wondering in this instance, is there any kind of proof that needs to be provided? But that makes sense that it's just a letter of explanation.

Phil Vollmer: Letter of explanation, that's satisfactory. And it also doesn't breach any of those, you know, protected areas.

Casey Morris: Right. Right. And that's, I'm glad that you clarified that, because I think that's important for people to know when they are, you know, looking at buying a house for a child who has a disability or someone who is on disability income and is looking to buy a house, it’s really important to know that they can't be discriminated against and also that they can be asked to provide, you know, intrusive information, be asked intrusive questions about their medical history or anything like that.

Phil Vollmer: Right. Right. Very good point. Yep.

Casey Morris: And then, as I had mentioned earlier, I wanted to ask you, in addition to these options for getting a loan, what are some other resources that might be available to help families who are looking to buy a home but need a little bit of financial assistance? Or they're looking at a home and they know that they're going to need to make some modifications or something like that. I know that there are some non-profits that exist that can help out. You know, what would you recommend to a family about where to get started or where to look for some of that assistance?

Phil Vollmer: Good question. So at least most of the social service organizations that are providing these services or connecting people to the services, you're going to find most of those recommendations or references come at the county level, at least in Pennsylvania. So that's, you know, your direct care physician or you might have, you know, like your case manager, they're going to be able to connect you with the resources in your community or surrounding area where you might be able to find housing on an interim basis for access to a group home, if in fact, that would be an avenue you want to pursue until you can provide your own solution.

And you're right, there are some nonprofits that would specialize in either modification loans. So, if you want to buy a home, but it's going to need a ramp put in and it's going to need some doors widened and some other modifications to allow the person to move around in the house and actually occupy it so it's safe for them, number one.

There are funds that are available. Most of the time, those funds are grants or they turn into grants. You know, it's going to be a loan that actually never goes into repayment. But it will stay out there as a second lien and would be paid off once the house is sold in the future. You may find your small local bank may have some sort of portfolio type of loan that would also, I mean, some of those guidelines, it probably is essentially originated mostly to a Fannie underwriting standard, but they may have their own funds that they're going to say, yeah, we can put this up. So, you find some community sources for those types of funds.

Casey Morris: That's really good to know that there may be some modification loans or grants available. And, you know, it sounds like it's just always worth, before going ahead with the loan or saying, okay, we're just going to go buy a house to look at, you know, the full spectrum of resources that may be available or to talk to a loan officer and ask, you know, what else is out there? You know, what kind of what resources can we pull together to make this as affordable as possible?

Phil Vollmer: Yeah. A good, trusted advisor on the lending side is key. You know, somebody that can really dig into the details and ask, how do we make this work? Can we actually make this qualify? So, the parents, if the parent is providing housing for their child and they themselves own a home with a mortgage on it, it's fine. That's not that they wouldn't be approved so long as you know, the guidelines are satisfied. Debt-to-income ratio and that kind of thing. And so, you know, a loan officer can look at the situation and say, we can do this. Then you can start looking at houses and how it fits into the equation.

Casey Morris: Okay. Great. Great. Well, thank you so much. This was really informative, and I really appreciate your insights on this. I think it's a really important topic and hopefully it'll help people, you know, kind of look at their options and think about, you know, what may be available to them.

Phil Vollmer: Oh, you're very welcome. Thank you for the opportunity. I personally have done many of these helping parents by for their disabled child and ironically, the other way around, helping children, well, buy a residence for their parents who, you know, fixed income-wise just couldn't afford a house but were not looking for assisted living and didn't want to give up their independence and autonomy, which I think that's a lot of, and that's a driving force. And I'm seeing that firsthand with my involvement with the board of directors for this local nonprofit, because we interact heavily with the folks that are consuming the services that the organization provides.

And that's a pretty common thing. They want their child to be able to have the dignity of being able to do it on their own because they're still capable. And that's, I think, the part that gets lost in the shuffle. There's an assumption that disability means automatically, well, you're at the mercy of what essentially the community is willing to give you, and that's not what people are looking for. So, this this is, I think, a really helpful tool.

Casey Morris: Yeah, absolutely. I think that this is a really good option to empower families and, you know, the adult child who is going to live in the home to have that autonomy and to be able to create an environment that really supports their quality of life and allows them to, you know, to live on their own terms. Great. Well, thank you. And if somebody wanted to reach out to you with an inquiry about potentially buying a home or just wanted to get some more information from you, what's the best way for them to reach you?

Phil Vollmer: They can reach me as easy as whatever they're comfortable with. My direct email, phil.vollmer@fairwaymc.com. My cell phone number 814-867-3838. And my website, which is homeloansbyphil.com. That’s so I never forget it. Yeah. Any way that I can help. To answer questions and refer them to local organizations for other parts of the service that may not even have occurred to them.

Casey Morris: Okay, great. And I'll put all of that contact information into the show notes so it will be really easy for people to reach out.

Phil Vollmer: Okay.

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Licensing & Disclaimers

Disclaimers:

Phil Vollmer

NMLS# 706576

The information in this podcast is distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway Independent Mortgage Corporation.

Copyright©2022 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. Fairway is not affiliated with any government agencies. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.

Fairway is required to disclose the following license information. AZ License #BK-0904162; Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, License No 41DBO-78367. Licensed by the Department of Financial Protection and Innovation under the California Financing Law, NMLS #2289. Loans made or arranged pursuant to a California Residential Mortgage Lending Act License; Georgia Residential Mortgage Licensee #21158; For licensing information, go to www.nmlsconsumeraccess.org; MA Mortgage Broker and Lender License #MC2289; Licensed Nevada Mortgage Lender; Licensed by the NJ Department of Banking and Insurance; Licensed Mortgage Banker-NYS Department of Financial Services; Rhode Island Licensed Broker & Lender; Fairway Independent Mortgage Corporation NMLS ID #2289 (www.nmlsconsumeraccess.org).

The information in this podcast is distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway Independent Mortgage Corporation.

Copyright©2022 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. Fairway is not affiliated with any government agencies. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.

Fairway is required to disclose the following license information. AZ License #BK-0904162; Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, License No 41DBO-78367. Licensed by the Department of Financial Protection and Innovation under the California Financing Law, NMLS #2289. Loans made or arranged pursuant to a California Residential Mortgage Lending Act License; Georgia Residential Mortgage Licensee #21158; For licensing information, go to www.nmlsconsumeraccess.org; MA Mortgage Broker and Lender License #MC2289; Licensed Nevada Mortgage Lender; Licensed by the NJ Department of Banking and Insurance; Licensed Mortgage Banker-NYS Department of Financial Services; Rhode Island Licensed Broker & Lender; Fairway Independent Mortgage Corporation NMLS ID #2289 (www.nmlsconsumeraccess.org).

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