@Carl
Thank you for your response. To clarify your question/concern about the "rent" that we are charging them. Neither my wife and I nor my parents are able to pay the full mortgage so my parents are paying what they are able and my wife and I are making up the difference to pay the mortgage. So not rent, per see, just help with the mortgage.
Per the terms of the Family Opportunity Mortgage, it's an "owner-occupied" second home. This type of mortgage is for purchasing homes for elderly parents, or kids going off to college, the typical distance requirement for a second home is waived and it isn't considered an investment property due to the nature of the living situation.
Does this adjust your understanding of our situation? I know we are not the only people to take out this Fannie Mae loan, so I'm hoping to get some others advice as well. Thanks!
