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  • Buying a home for your parents or family guidelines

    April 28, 2023 | Blog | Joe Metzler
  • Minneapolis, MN:  Buying a home for your parents of other family members who otherwise couldn't afford one is probably a bit more common than people think. While it is awesome that you are doing it, there are some tips to help you save while doing it, especially as most Mortgage Loan Officers are NOT even aware of this program, and would steer you into higher cost loans.

    People commonly think of this as either buying a second home, or buying an investment property.   While that is OK, it isn't the cheapest way to go.   Lender terminology for the purchase can greatly effect the transaction. Basically both second homes and investment properties are deemed higher risk loans by lenders, therefore there are different guidelines, down payment requirements, and higher interest rates.

    See Current National Rate Averages

    Second  / Vacation Homes

    Buying the home as a second home / vacation home property requires a minimum down payment of 10%, and while the rate may vary, generally expect the interest rate to be  3/4% higher than an owner occupied homes mortgage rate. The property must also meet logical distance requirements.  For example, your primary home and the second / vacation home are just a few miles apart., that won't fly.  But if your primary home is here in Minnesota, and you are buying a lake home in northern Wisconsin, or a condo on the beach in Florida, well than that would be just fine.

    Investment Loans

    Buying the home as an investment property requires a minimum of 15% down payment, and again, the interest rate will be significantly higher, depending on how much you put for down payment.  You can easily expect a full 1% higher or more with a 15% down payment. No location distance requirements apply.

    Family Opportunity Loan Guidelines

    This option is your best route, as the minimum down payment is just 5%, and the interest rate is the same great rates as you get when buying your primary home. This is because under this program, the home is deemed and owner occupied home, even though we know you personally will not live in it.

  • Requirements

    You must meet the requirements of a standard conventional loan.  The big one here is the ability to afford two house payments.

    To meet the family opportunity guidelines, you must be buying the home for them because the person (usually elderly parents) do not work, or do not have sufficient income to qualify for a home loan on their own.  You can also use this program for family members.  For example, a handicapped sibling who is unable to work or doesn't make enough money to get a mortgage.

    You may be asked to document poof of the relationship, and the persons income showing their inability to qualify on their own.


    The relaxed guidelines for buying a home for parents can easily reduce your out-of-pocket costs, down payment and closing costs significantly, meaning the difference of being able to do this or not.  The difference of the minimum down payment on a $350,000 home between the family opportunity option and an investment loan option is over $35,000.

    The parents or person does NOT have to be on the actual loan or in title to the property.  Just you.

    Getting Started

    If you are ready to help your parents or family, we are ready to help you. Simply call our loan experts at (651) 552-3681, or get started with a quick Online Mortgage Application.

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