FHA Non-Occupant Co-Borrower loans - Also known as Kiddie Condo loans

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Non Occupanying Co-Borrower loans - Kiddie Condo loans

 

 

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FHA loans have many features that still aren't talked about as much as one would think, because they are still fairly new to more than have of the loan originators out there. Now, some might argue half is very extreme, even though this is my opinion, I will still stick to this statement for many reasons.

As a loan officer with more than 17 years of mortgage experience, the non-occupant co-borrower program is very simple to understand.

FHA will allow a co-signer that is not living in the house to actually be on the mortgage and co-sign for the loan. Keep one important thing in mind, they must be a family member/relative. And this can be great for first time homebuyers. One thing that so many get confused no matter what type of loan they are applying for is that a co-signer with good credit can't overcome the bad credit of the primary borrower. Meaning that the co-signer with good credit can't get you a better priced loan. If the primary borrower still has lower credit scores that don't qualify, then the loan won't happen.

 

 

 

 

Now keep in mind that this is a lot different when doing a non-occupant co-borrower loan with a conventional mortgage. Unlike the FHA non-occupant co-borrower loans, which the primary doesn't actually need a job, on a conventional program such as this, that primary borrower still needs to qualify with some type of income ratios. And this usually doesn't help. Besides, in most cases, with the pricing hits on a conventional loan, it would be much cheaper doing a FHA loan.  Keep this in mind also, back in April of 2008, HUD allowed this on refinances also.  A family could help you refinance your property and not live in the property.

 

 

 

 

John Belushi in Animal House

Now, for those of you who remember John Belushi in Animal House, what I consider an American Classic back then, this next part my be very important if you have kids about ready to attend college or are attending college.

The FHA non-occupant co-borrower program can also be known as the Kiddie Condo loan.  This basically mirrors the same guidelines as what I explained above. It's just another term and another way to help keep your kids college expenses lower. First off, you don't have to buy a condo. It could be a single family dwelling, or a duplex. One thing that I didn't mention above is that you can't have a co-signer on 3 units or 4 units, not unless they are going to live in the property as their primary. 

 

What's appealing about the FHA Kiddie Condo loan is that you could have other students live in the property and that you could receive rent. A great example :

Duplex : Each unit has 3 bedrooms. Rent goes for about $500 a month. Your total mortgage payment, to include mortgage insurance, taxes, and homeowners insurance is $2,250/month.

You have one son in the property who won't be charged rent. That leaves you 5 other tenants at $500/month. That is $2,500/month. That basically covers your mortgage payment and leaves you a little extra for repairs and such. Your son pays less for attending college, and you get a tax right off, and that you are building equity. Please speak to a tax accountant/CPA for details on this.

 

 

 

 

Key Point to Remember -

Even though a lot of this sounds easy, you still need to work with a loan officer that is up to date on this kind of financing and on FHA loans in general. A good example : you use to be able to have non-occupant co-borrowers even on 3 units and 4 units, up until about a year ago. One more thing to keep in mind, even though these are HUD's guidelines on FHA mortgages, many lenders have lender overlays. That some lenders might not be able to do what I described above. I know one borrower that already ran into this, after many promises upfront.

 

 

 

 

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Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

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For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Tim Bradford 09/14/2009 10:43 AM
  2. Monique Hailer 09/24/2009 04:00 PM
  3. Laura Reilly 01/25/2011 12:31 AM
Topic:
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Location:
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fha non occupying coborrowers
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Ambassador
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Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate
Realtor / Owner - RE/MAX Access - Philadelphia, PA

Jeff - Great product indeed and a great example of the benefits of this program when a son or daughter maybe in college and gives the opportunity to own real-estate and get a fantastic loan product as a result !  Love the Belushi analogy as well - that is a classic indeed !  ~ Chris

Sep 12, 2009 01:34 AM #1
Rainmaker
385,133
Drick Ward
NEPTUNE REALTY - Virginia Beach, VA
"RealtorDrick" - Experienced Representation

Jeff, great post - always good to learn of new and lesser known ways to get the financing done. And I've got a listing that's near Old Dominion University right now--would be perfect for this.  Heading there today to add some information about this financing alternative. Thanks.

Sep 12, 2009 01:45 AM #2
Rainmaker
453,149
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

JEFF- I currently have one buyer who is using this product to purchase a home for her son.  Makes a lot of sense.

GREAT IDEA!

Sep 12, 2009 02:48 AM #3
Rainmaker
183,081
Janet Guilbault
Guild Mortgage - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Jeff: Great timing as the kids are getting back into college, and important info.

I remember trying to buy a condo for my daughters when they were both attending UC Berkeley. I got out bid over and over, lost heart, and then another whole nightmare of trying to find a rental unit (you wonder why they don't have enough housing in Berkeley)

Finally beat out 55 other applicants to rent a place. I am actually glad I didn't get the condo in light of how properties like that have dropped so far in value here in the Bay Area.

I am waiting for your post about the changes coming in condos on Oct. 1. Have you written that and I missed it?

Sep 12, 2009 02:53 AM #4
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

CHRISTOPHER.... . I think it is and can help so many.  And especially for those who have kids going to college.  And thanks about the Belushi thing... loved him and that movie.  thanks

DRICK... . that's great.  And you can certainly print this out and hand it to them as a point of reference. thanks

ALLISON.... . I think it can make a lot of sense, in most markets. Especially if your mortgage payment is reasonable and you are getting good rent to pay for it.  thanks

 

JANET... .  yea, I missed getting this out prior to school.  But it's definitely something for parents to think about as their kids get older while in school.

In regards to the condo changes, yes, I didn't write about that. FHA condos and approved condos - what you need to know.  Now, I read one loan officer that wrote about this, telling everyone that she feels this is better and will help out much more. In my opinion, I totally disagree and spoke with some FHA loan officers of 10 + years and all 8 of them didn't agree with her post.  A spot approval was easier and less time consuming... and sometimes not as expensive.

 

Sep 12, 2009 03:01 AM #5
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Jeff Dowler
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude - Carlsbad

Jeff - with prices being what they are for condos, buying one for the college kid makes sense if you can swing it. We should have years ago when our daughter was at USC.

As always you have shared a wealth of information on FHA loans. It is getting harder and harder for folks to use them here because they are gettin gbeat out by cash buyers in the majority of cases. Also, with the upcoming change in spot approvals, there are many properties that will not work for these loans.

Jeff

Sep 12, 2009 06:35 AM #6
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Ann Allen Hoover
RE/MAX Advantage South - Hoover, AL
CDPE SRES ASP e-PRO Realtor - Homes for Sale - AL

When my son went off to college we worried about the cost of housing.  Turned out one of his friends' dad bought a place and allowed us to rent for a very reasonable amount.  It was a great deal for us, but even better for him. :)

Sep 12, 2009 08:11 AM #7
Rainer
111,032
Charles Perkins
Charles G. Perkins, CPA - Burien, WA

Thanks for the information on FHA loans.  It does sound like this could be a way to help young people potentially get into a house with better financing.

Sep 12, 2009 05:56 PM #8
Rainmaker
225,408
Tim Bradford
Cleveland, OH
NMLS 250013

Jeff,  I have done a few Kiddie-Condo and they were very straigh forward being used by the children of the parents.   So coworkers have had problems when they tried to create a Condo-Hotel with the renting of individual rooms.   What have you seen or warnings would you give to people considering this option. 

Sep 13, 2009 12:16 AM #9
Rainer
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Dana Wilkinson
Connect Realty, The Woodlands, TX - The Woodlands, TX
Broker-Your TX agent for The Woodlands-Spring-Conr

Posts like this are why I subcribed to your blog...I feel like I can stay "in the know".

Sep 13, 2009 02:30 AM #10
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

JEFF... .  I keep hearing about more cash buyers in some markets. Are you saying that you are seeing more than in recent years?  In regards to the kiddie condo stuff.  Keep in mind, it's not just for condos. As I mentioned, it can be for SFD's and duplexes.  thanks

ANN.... . bingo....  a friend of mine in college, his dad did the same and I rented from him for 2 years.  It was semi cheap for us, but as you said, they really did do well.  thanks

CHARLES.... . ,my pleasure, and yes, it can help some get into a house that couldn't do it on their own.

TIM.... .  I don't know if you can even do condo-tels period, with any lender or investor.  Most Alt-A companies are out of business and they were the only ones that I knew that were even doing condo-tels. I am almost 100% positive that they can't be done through FHA. I will look into it.  thanks

DANA.... . thank you very much for that compliment.

 

Sep 13, 2009 03:01 AM #11
Rainmaker
225,408
Tim Bradford
Cleveland, OH
NMLS 250013

Jeff, my comment about Condo-Hotels was in the context of a Boarding House type of property on/or near a college campus.  One case had the issue of individual locks on each of the bedrooms as well as hot plates and mini frigs in each room.  The underwriter did not like this because it appeared that like a boarding house for other college students.  Possibly being a 5 bedroom home being purchase by the parents of one child contributed to their opinion.  

Sep 13, 2009 03:55 AM #12
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Monica Bourgeau
LifeOhm - Portland, OR
Abundance Coaching & Essential Oils

Jeff - thanks for the information, I always learn something new from your blog posts. Would this work well for college students with a parent co-signer?

Sep 14, 2009 03:31 AM #13
Anonymous
candice

Hi I am a student and I am trying to work on one of these loans. I have excellent credit and will be making enough while going to school to pay all my expenses (fellowship).  I can't qualify for the loan on my own because I have been self employed for the past two years and took deductions. 

 

So the question:  My aunt wants to co-sign (co-borrow) but does not want it to look like an investment property for her and cause problems in the future if she buys investment properties (which she does) and she can't show income on this property.  She is really just there to help me qualify  Is this a legitamate concern?  Can I just have all the tax info in my name and her name just on the title?

Apr 06, 2010 12:35 PM #14
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