Q. My mother is almost 80 years old. Even though she is still very vital and able to care for herself, her house is more than she can handle. She doesn't want to go into a home for the elderly, nor do we want her to. However, we do not have room in our home for her to live with us. She tried to sell her house, without much luck, since it's now in a declining neighborhood and is in need of much repair itself. Even if she were able to sell it, she couldn't get enough out of it to even purchase a nice condominium near us without financing part of it. Isn't there some kind of government program to assist senior citizens obtain financing for housing that is more suited to their needs?

A. In October 1989, Federal National Mortgage Association introduced its new Senior Housing Opportunities (SHO) program, giving senior citizens greater leniency in qualifying guidelines. The goal was to assist senior citizens in establishing secure living arrangements close to relatives and/or friends and allowing them to stay in the communities in which they have lived for so many years.Currently, four approaches to SHO are being tested. If successful, they will be permanently incorporated into Fannie Mae's standard mortgage products.

1. Accessory apartments. This is a completely private living unit installed in a single home; a mother-in-law apartment. (Caution: check the zoning!) There are two ways SHO allows this option to be used:

a. The senior citizen may buy a house with an apartment in it, leasing out the apartment to a relative or friend. The anticipated reincome is included in the senior citizen's total qualifying income.

b. Family members may purchase a home with an apartment in it to accommodate their parent

2. Elderly cottage housing opportunity (ECHO). This is a separate, self-contained, temporary unit built on the lot of an existing home. For example, a daughter may have a "cottage" built in her own back yard where her mother could live. To qualify for financing, familial relationship must exist. (Here again, be sure to check zoning.)

3. Home sharing. Fannie Mae allows a single-family home to be converted into a "shared" home with up to four living units. There are three ways to utilize this method:

a. The house may be bought by a senior citizenand friend

b. The senior citizen may buy the home and then rent out the extra bedroom

c. The house could be owned by a public or private agency and one or more senior citizens could rent rooms.

d. Sale/leaseback. The senior cirtizens can sell their home to an investor, perhaps one of their children, and then lease it back. The investor is required by SHO to grant the seller a lease for a minimum of five years. (This is not to be confused with reverse mortgages.)

To qualify for SHO, the applicant must be at least 62 years old. Income must meet minimum requirements, but all sources are countable: part-time work, pension/retirement, Social Security and interest/dividends. The monthly mortgage payment shouldn't exceed 28 percent of the applicant's monthly gross income, and this expense plus other fixed obligations shouldn't exceed 36 percent. However, some offsetting factors are allowed, such as size of down payment.

The major advantage of SHO over standard mortgages is that applicants get the benefits of rental income combined with the qualifying guidelines of an owner-occupied property. Rental income is considered for loan qualification.

A SHO mortgage may equal up to 90 percent of the home's value. However, if the senior citizen or relative purchases a home that already has an "accessory apartment," the loan may be up to 95 percent of the value. Bear in mind, though, that private mortgage insurance will be required on any mortgage exceeding 80 percent loan-to-value.

Senior citizens constitute the fastest-growing market in the country. According to the American Association of Retired Persons (AARP), 12.4 percent of the U.S. population in 1988 was over the age of 65. It is anticipated this percentage will grow to 13 percent by 2000, and 21.8 percent by 2030. The SHO program is just one way Fannie Mae is attempting to accommodate this country's changing needs.