By Brian Patton, CCIM
Despite its relative obscurity, a great investment tool for college bound students is growing in popularity among savvy college parents. The FHA loan program, affectionately nicknamed “Kiddie Condo Loans”, is one of the best programs out there to help jump start a student’s credit and provide a low down-payment option for cash strapped parents to purchase a home for their son or daughter.
For details on the loan program, I went to Steve Beecham, president of Hometown Mortgage in Alpharetta, Georgia. Steve’s excitement over the program is evident as he explains, “There are few programs, if any, left in the market place where a co-signer doesn’t have to live in the property.” The bottom line is a college bound student can qualify, with a parent’s help, for as little as $500 down.
The FHA program actually requires three percent down. However, that three percent can come as a gift from several different places, such as:
1. A relative by blood, marriage, or law
2. The borrower’s employer
3. A charitable organization
4. The seller (can give up to 6 percent)
One easy source for the funds might be the Nehemiah Down Payment Grant. This is a charitable organization that will fund up to 6 percent for the purchase, 3 percent of which can be used for the down payment and the other 3 percent can be used for closing costs. Your mortgage lender would fill out the paperwork on your behalf. Six percent would be written into the purchase price as a contribution to Nehemiah. The organization in turn, at closing, gives all of it back to the seller, less a $500 contribution from the buyer. So, the net out of pocket from the buyer is the $500.
Obviously, there are some ground rules for the program, some of which are:
1. At least one of the buyers (usually the college student), must occupy the home. But extra bedrooms can be rented out to help defray the costs of the mortgage.
2. Qualifying guidelines are based on the student’s and the parent’s credit and income. Generally, both parties must have a credit score of at least 580.
3. If it is a condo, then a majority of the condos in the complex must be owner occupied.
Also, don’t let the nickname fool you. This program can be used on virtually any property, not just condos. And, it can be used up to a maximum loan amount of $346,000 for homes in some areas.
For more information on the program, contact Steve Beecham at (770) 475-6161 X368.