A kiddie condo loan is a great way to find a house or condo for your student! Federal guidelines for every mortgage program have become tremendously more strict since the housing meltdown of 2008. Before the housing meltdown, under U.S. Department of Housing and Urban Development guidelines, a college student with no income and no credit score could get a kiddie condo loan with a family member as co-signer.
However, there are some general guidelines that you need to be aware of before taking out a kiddie condo loan:
FHA credit underwriting standards must be met by each individual who signs on the loan
Each person on the loan must sign and everyone is liable for full repayment of the loan
The credit score guidelines set by the lender must be met by each person on the loan
Borrowers living in the property are limited to only one, thirty day delinquency to other creditors
The borrower living in the property must have a clean record of delinquencies on rent
Excluding medical, the borrower living in the property must have zero collection accounts filed within the past year.
Unless the borrowers are related by blood, marriage or law (except for rare circumstances) or the loan is for a property that is 2-4 units, the maximum loan-to-value will be 75%
In order to prevent parents from developing a portfolio of rental properties, certain rules are in place
Whatever the lowest credit score is among the borrowers is what will be used for the loan application.
The income of the co-signer must be enough to cover their own debts as well as the child or students mortgage.
If the main borrower defaults, the co-signers are responsible for covering the full repayment of the loan
The kiddie condo loan allows non-occupant co-borrowers, this means parents are able to purchase a property with their credit and income but are not required to be resident in the property; only the co-borrower is required to live in the property.The property the loan is for can't be a second home or investment, so regular Arizona FHA home loan rates apply. This loan program allows participants to charge rent to roommates! If properly used, the financial sting of college can be slightly alleviated with a kiddie condo loan.
Another great feature of the kiddie condo loan is that it allows for roommates! While this is a great way to help finance the high costs associated with college, it is a major responsibility on the part of your child/student. Along with having to manage the independence of being a college student, having to act as a landlord will be a great learning opportunity for your child/student! That being said, make sure your child/student is ready for the responsibility.
It is important that you understand these guidelines so that you can make the loan process as simple as possible! With costs of college hitting all time highs the kiddie condo loan is a great way to help cut back the overwhelming costs of college!