Does this type of FHA mortgage still exist? It allows a person to co-borrow with a blood relative (e.g., parent, grandparent, sibling, etc.) who helps qualify for the loan using their income or assets. Both borrowers take title to the property and sign for the loan. Check Out the FHA Kiddie Condo Loan details here
As of the time of this blog post, I believe this mortgage is still available and there may be three big advantages to using this type of loan:
1. A low down payment (as little as 3% of the purchase price).
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
The tax benefits, such as deducting mortgage interest and real estate taxeson a Federal Income Tax return, can be divided among the owners, according to who pays the expense. See your tax advisor for details.
Make sure you read the section on credit as both borrowers must qualify. If the owner occupant has little or no credit you should review the non traditional credit section and pay particular attention to the information on the 2nd page.
Note that the property DOES NOT have to be a Condo. If it is a condo then you need to make sure that the project is approved or the that the property can get a “Spot approval”.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.