Tim Bradford - AMMCorp.net


FHA Non-Occupant Co-Borrower loans - Also known as Kiddie Condo loans

For any parents with children that are headed off to college this may be an option to consider instead of paying the dorm fees.  



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Non Occupanying Co-Borrower loans - Kiddie Condo loans



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FHA loans have many features that still aren't talked about as much as one would think, because they are still fairly new to more than have of the loan originators out there. Now, some might argue half is very extreme, even though this is my opinion, I will still stick to this statement for many reasons.

As a loan officer with more than 17 years of mortgage experience, the non-occupant co-borrower program is very simple to understand.

FHA will allow a co-signer that is not living in the house to actually be on the mortgage and co-sign for the loan. Keep one important thing in mind, they must be a family member/relative. And this can be great for first time homebuyers. One thing that so many get confused no matter what type of loan they are applying for is that a co-signer with good credit can't overcome the bad credit of the primary borrower. Meaning that the co-signer with good credit can't get you a better priced loan. If the primary borrower still has lower credit scores that don't qualify, then the loan won't happen.





Now keep in mind that this is a lot different when doing a non-occupant co-borrower loan with a conventional mortgage. Unlike the FHA non-occupant co-borrower loans, which the primary doesn't actually need a job, on a conventional program such as this, that primary borrower still needs to qualify with some type of income ratios. And this usually doesn't help. Besides, in most cases, with the pricing hits on a conventional loan, it would be much cheaper doing a FHA loan.  Keep this in mind also, back in April of 2008, HUD allowed this on refinances also.  A family could help you refinance your property and not live in the property.





John Belushi in Animal House

Now, for those of you who remember John Belushi in Animal House, what I consider an American Classic back then, this next part my be very important if you have kids about ready to attend college or are attending college.

The FHA non-occupant co-borrower program can also be known as the Kiddie Condo loan.  This basically mirrors the same guidelines as what I explained above. It's just another term and another way to help keep your kids college expenses lower. First off, you don't have to buy a condo. It could be a single family dwelling, or a duplex. One thing that I didn't mention above is that you can't have a co-signer on 3 units or 4 units, not unless they are going to live in the property as their primary. 


What's appealing about the FHA Kiddie Condo loan is that you could have other students live in the property and that you could receive rent. A great example :

Duplex : Each unit has 3 bedrooms. Rent goes for about $500 a month. Your total mortgage payment, to include mortgage insurance, taxes, and homeowners insurance is $2,250/month.

You have one son in the property who won't be charged rent. That leaves you 5 other tenants at $500/month. That is $2,500/month. That basically covers your mortgage payment and leaves you a little extra for repairs and such. Your son pays less for attending college, and you get a tax right off, and that you are building equity. Please speak to a tax accountant/CPA for details on this.





Key Point to Remember -

Even though a lot of this sounds easy, you still need to work with a loan officer that is up to date on this kind of financing and on FHA loans in general. A good example : you use to be able to have non-occupant co-borrowers even on 3 units and 4 units, up until about a year ago. One more thing to keep in mind, even though these are HUD's guidelines on FHA mortgages, many lenders have lender overlays. That some lenders might not be able to do what I described above. I know one borrower that already ran into this, after many promises upfront.





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Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Tim Bradford
Ohio Mortgage Banker LO.007173.000/ NMLS 250013
Cell: 216.324.8113 Anytime
www.GetAMortgageNow.com or www.Go2Apply.com
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Serving the Ohio Realtors and Home Buyers and Home Owners
Comment balloon 2 commentsTim Bradford • September 14 2009 05:43PM


Tim... thanks for reblogging this.  You wonder if parents knew about this, how many it could have helped in regards to affording college for the average person.

jeff belonger

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) over 8 years ago

Jeff,  I agree with the stipulation of DO NOT TRY TO CREATE A BOARDING HOUSE for college students at the time the property is purchased.   Use this as a means of purchasing a residence for your child while in schools, do not make it look like you are creating an income property. 

Posted by Tim Bradford, NMLS 250013 over 8 years ago

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