News You Can Use
Did you know that FHA loans allow for nonoccupant coborrowers? Lenders refer to this type loan as a ‘kiddie condo’ because it’s often used by parents and their children. Keep in mind the property can be any eligible FHA property (e.g. condo, townhome, single family residence).Let’s face it – college is often worthy but expensive. Using UNCC as an example, undergraduate tuition for two semesters will add up to just over $5000 per year. Factor in an $800/month rent for nine months and you’re easily at over $12,000 in annual expenditures. And we haven’t even got into the funding for books and midnight pizza orders.
What if instead of paying rent for their child’s housing the parents use this time as an investment opportunity? How this scenario works is the child/student is the primary borrower (since they will occupy the property) and the parents are nonoccupant coborrowers. All borrowers’ credit must meet underwriting guidelines and the parents’ income typically carries the loan.
There are several benefits to this strategy:
1. A low down payment - currently as low as 3.5% of the sales price
2. A lower, owner-occupied interest rate on the mortgage vs the higher interest rates associated with investment properties
3. Helps the child establish a strong credit history
4. Extra bedrooms can be rented out to help cover the mortgage payment.
5. Tax deductions such as mortgage interest and real estate taxes may be shared among the owners (Consult with a tax advisor for details)
So instead of spending the average UNCC area rent of $800-$1200, the same monthly amount can be put towards ownership of a property in the $115,000 to $175,000 range. What a smart way for a college student or recent graduate to invest in real estate with the help of a family member.
Roz Bailey
Allen Tate Realtors
Lake Wylie, SC 29710
Cell-704-913-4754
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