The FHA “Kiddie Condo” program has become a popular option for many parents with children attending college.
Many parents have a desire to help send their children to college. Some, with the help of a financial planner, estimate the cost of future college tuition years in advance and start saving little by little. Whether this is the case or not, all parents who would like to help send their child to college realize that student housing is potentially a substantial portion of the cost of an college education.
Right now there is good news. Your student housing expense can be dramatically reduced through the utilization of the FHA Kiddie Condo program. The combination of mortgage rates near an all-time low and the large supply of affordable houses has created an opportunity to own for less than it costs to rent.
The FHA “Kiddie Condo Program” is a nickname given to the FHA mortgage guideline that allows for a non-occupant co-signer to qualify for the loan. The actual occupant of the home does not have to have employment, income or assets. However, the occupant’s credit must meet FHA’s qualification standards.
The “program” became popular as a method for parents who were sending their children away to college to buy them a home (or condo) to live in as opposed to paying rent – hence the nickname “kiddie condo”. However, the occupant is not required to actually be a college student.
The benefits of the program included the fact that the home can be purchased as a primary residence for the occupant. As such, the non-occupying parent only has to invest a minimum down payment amount into the property.
Consider the following scenario:
- 2010
- Parent(s) lives in California
- Daughter or son lives in Arizona and is attending college
- Current rent for a decent 2 bedroom 1 bathroom apartment is around $800
- Home built in 2000 with 3 bedrooms and 2 bathrooms is selling for $70,000
- FHA “Kiddie Condo” program allows the parent to buy the home with as little at 3.5% down ($2,450)
- Seller pays the majority of closing costs
- Total monthly PITI payment is less than $575 a month
- Child lives in home for 3 years. The downpayment spread over 3 years equates to $68 a month
Now consider the cost savings if the occupying child rents out the extra bedroom for $300 a month. In this scenario, they will be paying a net amount of $350 a month and own the home.
A parent should consider using the FHA “Kiddie Condo” program and taking advantage of the current FHA interest rates and low housing costs when determining how to efficiently help send their child to college.
Please contact me with questions.
Steve Lines
Authorized FHA Loan Consultant and Co-Branch Manager
480-344-3662 (direct)
480-329-3346 (mobile)
slines@bestfhalender.com (email)
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Read my articles on the FHA Mortgage Blog
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Do you have flyers that I could pass to my clients? I am on the Board at my son’s High School and could give this to all the kids and their parents. I am also going to speak at a few colleges in our area about affordable housing during college and his would be an asset.