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"Kiddie Condo" FHA loans aka Non-Occupant Co-Borrower Loans - What are they?

Belushi

Are you always looking for a great investment? Do you have any kids going to college or in college? Well, don't let the picture to your right scare you. Just that many of us can relate to the movie Animal House and John Belushi. That is not what college is about. But how about another way to help pay for your kids education?

So, what is a Kiddie Condo loan? It's your basic FHA loan that allows for a non-occupant co-borrower to help someone to purchase a home. The co-borrowers that will not be living in the home must be a family member/relative. Why the term condo? Just that condos in many college area where very affordable. But in my opinion, which I will show later, a 3 or 4 bedroom house would be a much better investment. Especially for the fact that you can usually get into the home with little or no money out of pocket. Again, I will explain this below.

As mentioned, college can be very expensive. I am going to use some basic numbers that won't apply in every college town or will be the same expense for a dorm room or an apartment. To find out more about these figures and a great way to invest your money while your kids are in college, please read :

The secrets of "Kiddie Condo" FHA loans (opens in a new post)

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Posted by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans on 07/19/2008 06:58 PM

Comments (33)

FHA Loans in the Mortgage / Finance Channel

fha loans, non occupant coborrower loans, non occupant loans, kiddie condo loans, fha mortgages, fha cosignors, down payment assistance

Originally posted at: FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware: "Kiddie Condo" FHA loans aka Non-Occupant Co-Borrower Loans - What are they?

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33 Comments on "Kiddie Condo" FHA loans aka Non-Occupant Co-Borrower Loans - What are they?

JUL

2008

Jeff - this makes terrific sense. I know ltos of parents who are considering buying condos so the kid will have a place to stay. And there coud be room for a roommae too! With the price of housng in some of the college towns this is a great investment and a good cedit boost for many college students. Bookmarked for sharing with some folks I know.

Jeff

nice post, good to know about that financing option vs a typical investor loan

Jeff,

I've never heard of this before!!! A great idea and a great way for kids to learn a little about real estate and financing!!! Thanks, Fran

Great information Jeff, especially since my son is going to High Point SC NC in a few weeks. Maybe I should look at real estate down there after we drop him off! Question since the parents are making the mortgage payments do they get the mortgage deduction? Does it then become considered a second home?

JEFF..... yes, it makes perfect sense. Espeically if you are in a good area to where prices are very reasonable and depending on property taxes. And, if you could make a few more bedrooms out of the house. My one friend's dad did this in college and it was a 6 bedroom house. Made 2 rooms out of the attic. I am sure it was very profitable.

DAMON..... thanks for the compliment. And yes, in reality, this is like an investment property, with a twist.

FRAN.... I am sure many loan officers never have also. Keep in mind, it's the basic FHA program that is for non-occupant co-borrowers. Just another name for marketing purposes.

LISA...... yes, you should look into it... first off, it's dirt cheap in S.C. What is the name of the college? How far is it from Hilton Head?

In regards to the mortgage deduction. You need to speak to your account about this. It's not your primary home. Everyone has their own way of things. But either way, someone would get to write it off. And no, it wouldn't be classified as a second home. It's kind of like an investment property. And remember, his name would go on the mortgage first. You and your husband would be on a separate application.

On another note... I am also licensed in S.C, Any other further questions, just e-mail me or call me. thanks

Jeff~ I have Hilton Head on the brain since we are going there next week. My son's college is in North Carolina. High Point is known as the furniture capital of the world.

Jeff....I've heard of the kiddie condos and was referred to one last year. Wasn't aware that something like this was available....they're really nowhere close to our market, but I am still exposed to these in Chicago.

JUL

2008

Jeff, there are two neighborhoods in DC with kiddie houses and condos. And I've had a few parents who covered the cost of undergraduate and law or medical school with the appreciation when they sold the places.

Oh! But appreciation is a thing of the past. I forgot!

Just kidding - I hope!

Jeff, I've never heard of this and it would have been wonderful information to know....I'm glad you got the word out to others. In thinking what I've paid for my daughter over the years, this would have been a much better option--

LISA...... well, Hilton Head is a great place to have on the brain. Besides, I could still help out in NC, but we won't be licensed there for another 30 to 60 days. Is he going to be a freshman? Sophomore?

LARRY...... I added a FYI to this post. Because the long and short of it is, this is a non-occupant loan. Just another way to market it, especially in college towns.

PAT..... I would bet, if more people knew about this, no matter what kind of market that we are in, many financial advisors would sell more of these also. As I mentioned, my example was basically done with no appreciation. Especially for the fact that in most areas, prices have stabilized at least. Which makes it for a great investment.

CAROLE......many people haven't heard of this or sold this way. And as I mentioned, I would bet that many loan officers haven't heard of this or thought about this marketing aspect of things. Yes, if many knew about this, it would have been a better option.

I have a kid heading off to college. But they have their own full apartments since it's a private college. Thank God for scholarships! But this is great information for lots of families.

Jeff - I believe it was you who introduced me to the term. It's a unique & niche product that can be of benefit to a lot of folks who may not otherwise get in the door. On a side note, Belushi rocked:-)

You know that Belushi and crew were filmed here at the University of Oregon, don't you? Great information Jeff. I have done them in the past and it is definately better than paying rent for four years. I can see a lot of work went into this post, sure hope you don't mind when I steal it. LOL

Jeff,

My daughter will be going to college in the fall of 2009 so I need to evaluate my options. Thanks for this timely post.

LISA.... wow, that's nice. But yes, I truly think that this is great information. Especially those realtors in a college town or parents having kids going to college. If you got really creative, you could certainly market this and help sellers, even if retaining the buyers.

JASON..... yea, I think we briefly talked about these in the past. Not only unique, but just having someone co-sign for you is a biggie. Because when it comes to conventional loans, it's a lot tougher with more requirements. And yes, Belushi rocked, especially in Animal House.

FRED..... yes, I knew that... about a year ago, when I did some research. It was very interesting..... thanks for the compliment. In regards to stealing this? Well, as long as you mention my name with link love, no problem then. thanks again for the compliment.

TRACY....... believe it or not, that will be here before you know it... ;o) I think you should definitely look into it and if you have a fistatesnancial planner, I would talk to them about this also. If you can get in there with hardly any money, that would be the best investment. If the DPA programs aren't around, such as Nehemiah and AmeriDream, you might still be able to use the other type of down payment assistance programs. Those of which are given by the townships or the state. thanks

JUL

2008

Thanks so much for the great article. I had a question I was hoping you could answer. I'm entering grad school and my dad wants to co-sign on a inexpenisve condo for me, around the $100k-$125k range. He has one of the highest credit scores on the face of the planet and a job take makes close to 6 figures. I on the other hand make enough that I could afford a $1100 mortgage based on a 28/36 qualifying ratio, BUT my credit score took a major dive to the 540 range because of a certain hurricaine a few years back. Would the kiddie condo program work for our situation? Are there any FHA programs that would take my dad's credit as the sole basis but still allow me to be on the mortgage? Thank you so much for you time and great website,

Jase

Jeff, I see alot of this here in Ann Arbor. My question is the resident ( the student) qualified on his credit score or the parents.

Also what if it is not a student?

But, the parents are co-borrowers, who have high 800 scores, daughter has in the 580's. Which rate are they quoted, based on the child or the parents, if they don't want to pay the higher rate.

JASE..... qualifying ratios aren't an issue here. Only conventional loans require that you still qualify with a certain ration, even if you have a co-signer. On an FHA, as long as you both qualify together.

In regards to the credit scores..... we would have to go off the lower of the two credit scores. There is only one type of FHA program for this to happen, in regards to having both you and your dad on this. And again, his higher credit scores won't make a difference. You can't use someone else's credit to better the situation, no matter if it's a conventional loan or a FHA loan. You just can't have a co-signer with worse credit.

Overall, if you were to just use your dad, then it becomes an investment property, which usually means a lot more money down and a higher rate. At least 10% down. The FHA loans only require 2.225% down and at least a total of 3% from the buyer, which includes the 2.25% down.

Any other questions, you can reach me at jbelonger@ihmci.com or on my cell # 609-440-5133 thanks

MISSY...... yes, you should see a lot of this in your area, considering that U of M is huge.... the funny thing about this program is that it actually doesn't matter if you are a student or not. As I mentioned, you can have a relative help you as a non-occupant co-borrower. Kiddie condo was just a slang term to market this to college students and their parents. It can be used anywhere, as long as you have a relative that basically co-signs for the mortgage, but isn't living in the property with you.

In regards to the credit scores, we have to use the mid score of the borrower with the lowest scores. And this is with any lender or investor, no matter what anyone says. Any other questions or if they need some help, just let me know. thanks

thanks Jeff.

Jeff, this is very good info. I live in a college town and, I've been considering making this a niche for myself. Thanks for posting this.

JUL

2008

U R the FHA expert! Great info Jeff!

JUL

2008

MISSY.... my pleasure...

STACIE.... thank you very much. I truly think that this could open up the doors not only for the consumer, but the realtor and loan officer... if they market it. And just a FYI.... I'll be licensed in IL. in about 60 days.

RENEE...... good to see you around, even though I haven't been around much. Thanks for the polite compliments.

JUL

2008

Jeff, this is great information. FHA is a big deal these days and many more that one thinks can qualify for it, specially with a "kiddie loan" as you call it for example.

JUL

2008

Glad to see this idea further fleshed out. I wrote a brief blog on it on July 2nd, repeated below:

FHA "Kiddie Condo" - is it gone? (edit/delete)

We used it to get kids into a home when they had no way to qualify on their own - no income, no assets, no credit history - and they had a family member who would go with them as a "non-occupying co-borrower".

(Ironically, since it was an FHA program, more often than not it could NOT be a condo)

Recently, FHA changed the rules - and people who have no traditional credit have to have "non-traditional" credit developed by lenders, and ALSO must have income and assets to qualify, EVEN if they have a family member willing to be a "non-occupying co-borrower.

Initially, this announcement made some think that "the kiddie condo is a thing of the past".

HOWEVER - the change only affects folks who have no traditional credit. As long as the occupying borrower has acceptable credit, the FHA still allows them to get into a home purchase entirely on the strength of a non-occupying family member's income, and assets.

The "Kiddie Condo" lives!

(Footnote - this is my first attempt at posting on Active Rain.)

BACK TO NOW:

I was only trying to point out that we could no longer do "kiddie condo" loans if the occupying borrower had no credit history (used to be that we could) - due to a recent change of FHA rules.

JUL

2008

I left a comment on your outside blog, but I figured it wouldn't hurt to leave one here, too. This was a thorough analysis of this particular form of financing - interesting stuff! I hope you're doing well - let's talk soon.

JUL

2008

I just wanted you to know, that not only did I mention your name I also said the information came from someone else so I didn't even get points for it. That is ok, I still think it is an excellent program that needs to be pushed.

SEP

2008

Jeff,

This is a great loan for parents of college-bound students. I also think it is a great loan for self-employed FTHB's. We've had several instances where we have a self-employed borrower who wants to buy a house but can't document his income or doesn't have the scores to qualify for a stated program. This program is great for those people too!

Ryan

SEP

2008

Good info, Jeff.

By the way, that picture is of the late John Belushi, not James Belushi. FYI

This is good information as it is just a few years away until my daughter goes to college.

Paul Thompson

Wells Fargo Home Mortgage

Vancouver WA

DEC

Jeff, I've had some GW medical students whose parents paid their tuition with the appreciation on the condos and coops they bought when the kiddies started out. But even for those who found the market sucked at graduation, there was still a great rental market. They held on for a few years and had the same great results.

DEC

Great info...BTW it was John Belushi, not James. :)

JAN

Jeff,

My daughter will start college this Fall. She has only had part-time jobs, and probably will not work while in college. If she does work, it would only be part-time. So, she probably doesn't have much of a credit score, and really no income while in college. Would this type of loan work for us? Would she be able to qualify assuming my wife and I have excellent credit and good income?

I will get back to some of the other comments... but I wanted to answer Todd.

TODD.... . your daughter actually doesn't need a job, but it does help a little. But she does have to have credit to qualify. Nobody can just use your credit to qualify, when she is the primary and you would be a co-signor. This is different than cars. She would need basic credit... proving about 3 to 4 pieces of credit. .. and it can be non-traditional credit.

What state is she going to college in? I can be reached at jbelonger@ihmci.com or my cell.... 609-440-5133 thanks, jeff

TERESA.... yes, it was John.... lol.. I need to correct that. Sometimes my fingers type quicker than my brain.

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