They are not buying their parents position but that of the co-owner,.
You certainly can buy any interest in a property you want without converting to a condominium.
As to the lender providing them a mortgage, that too is done everyday with two different owners in muli unit or single family properties,
In this case It would take signitures of both the new owners and that of the existing owners ( the parent in this situation) on the mortgage.
You would be eligible for all the same programs and tax benefits based on your acquisition cost if you live in the property, if you do not live in it, you will not get the benefits of a 1st time home buyer as it will be an investment, but you will be able to depreciate the property and the operating expenses which will help you on your personal taxes.
Two best people to speak with, 1st your parents accountant, 2nd a good real estate attorney, I have a couple to recommend if you need one. Lastly I also have a mortgage expert at Cambridge Savings Bank
You need to check with a lender, or two, about buying a condo in a two-family house. Conforming loan requirements are very strict about condos in small associations. Make sure you qualify to buy this condo before going through the expense of conversion. Lenders want large down payments (20 or 25 percent) and they take a serious look at the condo documents and budgets.
My advice is to check out your lending. If all is well there, convert to condos and buy the other part of your parentâ€™s jointly owned two-family house.