Previous generations may have seen moving out of the family home as a rite of passage, but today, many young adults view living with mom and dad—and maybe a grandparent or two —as a lifestyle choice. The trend toward this type of living arrangement is strong enough that new home builders are rethinking floor plans to better accommodate the needs of multiple generations living under a single roof.
In fact, this type of living arrangement has been found to be expanding across all U.S. racial and age groups. According to the Pew Research Center, nearly one in five Americans, or about 60.6 million, now lives in a multigenerational household, which Pew defines as two or more adult generations sharing a home.
Multigenerational living is likely to continue to gain traction as sandwiched generations— Baby Boomers and Gen X—look to accommodate the needs of their adult children and those of elderly parents looking to age in place with family members as caregivers.
Financing for an Extended Family
While there are many ways to finance their homes, your clients may not realize that there are options that specifically address purchasing or remodeling a home to better accommodate current and future household members’ needs. Here are some of the newer programs you may want to discuss with them.
Fannie Mae and Freddie Mac recently introduced programs that address the needs of multigenerational clients who may want to buy a new home or refinance the one they have. These programs allow nonborrower income to help your clients qualify for a mortgage they might not have been able to get approved for based on their own income. For multigenerational households, this means that the income of children, grandparents, other extended family members, and nonrelatives (such as roommates) may be considered.
Co-borrowing is an option as well. Being able to include all household members’ income within the same application could make a mortgage easier to obtain, especially if your client is looking to step up to a larger and more expensive home.
Here, your clients need to take an extra step outside the loan process. They should hammer out an owner’s agreement, preferably before applying, to determine how the home should be titled and what each family member’s financial responsibility will be. Even more crucial is that the document address how the marriage, divorce, or death of a co-borrower would be treated.
HomeStyle® Renovation Mortgage
Fannie Mae’s renovation mortgage is an alternative to refinancing with a cash-out option or to adding a second mortgage to the property. This program allows clients to use the proceeds of the loan to make modifications to an existing home to accommodate multigenerational living. It can also be used to buy a home that needs renovating to meet an extended family’s needs.
FHA 203k Renovation Loan
The FHA’s 203k program is another example of a loan product that may help with renovation of a home, though the restrictions on the types of accommodations may be a little narrower than the Fannie Mae product.
With the move toward aging in place, the delays in young adults moving out, and wanting to be able to share a home along with life’s little moments with loved ones, it helps that you can now bring a variety of financing options to the table. Even better, you can help clients do more than just address the economics of shared living—you can help them enhance the quality of life for several generations.