Principal Residence as Investment Property?

[Angelina A.]

Hello!

I am purchasing an investment property for my elderly parents to retire in.  My lender is offering me a “Family Opportunity Mortgage” option- a special borrower eligibility occupancy rule in which Fannie Mae expands the definition of a primary residence to allow me to purchase this home for my parents at Principal Residence rates and terms.  

From the Fannie Mae website: “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” for principal residence properties.

I am concerned about occupancy fraud.  My loan documents indicate that this is a Principal Residence (owner occupied), but I was advised by my realtor to designate the home as an investment property on the home purchase agreement.  Is this the correct designation for this property on the purchase agreement contract? Does it even matter?

Given this scenario, would I still be able to charge my tenant parents fair-market rent?  What legal considerations do I have to be aware of with this kind of investment property which is classified as a Principal Residence?  

Thank you in advance for any insight and/or recommendations. 

[Cheryl Packham]

This is interesting and I haven't heard of this before.  I am working on doing something similar so let me research this and see what I can find!