Feb 06, 2012
Contact Info:
SureFast Mortgage
Chris A Woods
Processing Manager
Phone: 602-734-0202
Fax: 602-734-0203
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 FHA "KIDDIE CONDO" LOAN PROGRAM

Don't let the name fool you, this loan program is not limited to Kids or Condo's.  This program was designed to allow individuals to take advantage of an FHA Loan by having a co-borrower help them qualify for a primary residence.

A great way for young adults to get started buying their first home is by using the FHA "Kiddie Condo" Loan Program. This type of mortgage allows a person to co-borrow with a blood relative (eg. parent, grandparent, sibling, etc.) who helps qualify for the loan using their income and/or assets. Both borrowers take title to the property and sign for the loan.

There are three big advantages to using this type of loan.

  1. A low down payment (as little as 3.5% of the purchase price).  A down payment assistance payment progam is allowed.  Get a gift from one of our programs to pay your down payment for you.
  2. A lower, owner-occupied interest rate on the mortgage Vs the higher investment property interest rate.
  3. Helps the new borrower establish a solid credit rating.

With a Kiddie Condo loan program, at least one borrower must occupy the property as his/her primary residence, but extra bedrooms could be rented out to help cover the cost of the mortgage payments. This is a perfect way for a college student, recent graduate, or anyone unable to obtain a loan on his/her own to buy a condo or townhome or single family home with the help of a family member. Apply for your Kiddie Condo loan today.

The tax benefits, such as deducting mortgage interest and real estate taxes on a Federal Income Tax return, can be divided among the owners, according to who pays the expense. See your tax advisor for details.

BIG ADVANTAGE FOR COLLEGE STUDENTS

Most college applications are in and students/parents are waiting to hear back on their destinations. Housing and in particular, housing costs, invariably comes up when talking about college!

One suggestion we’ve been offering folks is to purchase a condo for the incoming freshman, near campus of course, while attending college. With low interest rates, stellar deals and a four/five year time horizon I think this option is too easily ignored by most people!

One way to finance such a purchase is through the FHA Kiddie Condo Program, and a down payment asstance program. This is all possible because FHA allows non-occupant co-borrowers. This means a parent or a blood relative can purchase a condo, single family residence or a townhouse) using their credit and their income but not be obligated to live in the premise (which parent would want to??). This property isn’t considered a second home and certainly is not an investment (where you receive income). Hence, the interest rate is the same as that for a primary residence. The co-signer, in this case the student has to live in the property and the property is classified as their primary residence.

An additional feature of the Kiddie Condo Program is that it allows the occupant to charge rent to roommates. This makes the monthly payment very affordable and could even make it possible for the kids to hire a cleaning service so the place doesn’t smell too much! :-)

The loan process is very simple and similar to any other mortgage application. I suggest obtaining approval before proceeding. That way once you have received an approval the only thing to do is look for the right properties.

This is where you can see even greater benefits. Let’s say you purchase a 2 bedroom condo for $150,000.  Today the FHA interest rate on this (assuming steller credit) is just about 6.00%. Making your monthly payment $899. Add in $200 extra for HOA and taxes and we’re looking at $1099/month. If you split this three ways then it’s a very affordable $366 a month! 

Now, assuming a 5% annual appreciation in value after four years the condo will be worth almost $183,000. That is $32,000 in equity earned while going to college. (Don’t forget that the loan is being paid down during this time.) Let’s assume that this part of the equity is a wash to cover the cost during the time of sale. This is enough equity pay off any accumulated student debt or down payment for a “real” house after graduation! Taking it a step further, after graduation, you could re-finance the property and then turn it into a rental unit.

I will admit it will take a special college student to pull this off. I know how irresponsible I was back in the day, but I have confidence that there are incoming freshmen who are savvy enough to execute this plan to perfection. I think as a parent you owe it to your child to at least explore this option and see if they would be interested in starting life with a positive equity position!

 
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