College students can apply for mortgages if they are employed and have a co-signer, many of the lender standards are stricter now, but it’s still a possibility for college students to own their own place. That fellow college student in your class living in the condo a few blocks from campus may actually be a homeowner. With just a little help from mom or dad, you could be a homeowner too. When a parent is willing to help their child become a homeowner their not just teaching them how to buy a house, but they’re teaching them how to own a home. It’s a great opportunity to teach your kids financial stability too. If you’re in a college town, employed and are financially responsible it’s possible a kiddie condo loan is for you, however there may be some setbacks. These particular mortgages require a cosigner and many lenders are urging their clients against co-signing loans. It’s a really good program for young adults, teaches them to invest in their properties and helps them to learn financial responsibility
More Strict Guidelines
Ever since the housing meltdown, the federal guidelines for all mortgage programs are a lot stricter. This includes the kiddie condo loan program. Up until 2008 you could apply for a loan with no income and no credit history, as long as you had a family member co-sign for you. The lender would then just use the parent’s credit score to qualify for the loan. In today’s market the lowest credit score among the borrowers is used to qualify for the loan. Many students who use the kiddie condo loan program often times will have a renter to offset costs, however when you’re applying for the loan initially, rent payments are not and cannot be factored in for loan approval. Even after approval young adults need to be responsible about who they let rent. Typically, it will be friends who you consider your roommates, but it’s important to know you’re the landlord and they’re the tenant. So it’s always a good idea to write up some form of a lease, especially if problems arise. The document should be written upfront and clearly indicate rent and any other expenses your tenants will be responsible for.
HUD has guidelines for borrowers, like students, who have limited credit histories. Such as the borrowers can’t have bad credit, the borrower planning to live in the home must have absolutely no delinquent history. This includes delinquencies on rent, and no more than one 30-day delinquency to other creditors, such as a credit card payment or car payment, excluding medical payments.
Parents Proceed With Caution
Its important parents understand that as a co-signer they are just as much responsible for repaying the debt in the event the main borrower defaults on the loan. It’s their credit score and history at stake when they co-sign for a family member and any potential penalties or late fees will fall into their lap. If the main borrower defaults it’s the co-signers credit that is going to be damaged. If they do decide to co-sign, the co-signer has to show proof of enough income to pay their own debts including the student’s new mortgage payment. It will take a well financially stable parent to qualify. Also, being listed as a co-signer on a family member’s mortgage could make it difficult for the co-signer to buy other property or qualify for other loans.
These loans however, aren’t limited to only parents or grandparents helping their children. According to HUD co-signing borrowers can include siblings, stepchildren, nieces, nephews, cousins and even unrelated people who can show proof of a longstanding family-type relationship. These loans also aren’t limited to only condos despite the name “ Kiddie Condo Loans”. Always proceed with caution before co-signing for a family member. They are going to be new at home ownership, and that comes with a lot of responsibility including being able to afford issues that arise after they have moved in. Broken A/C, broken refrigerator, roof leaks, etc. Be sure that you have confidence that who you’re co-signing for is mature enough to be able to handle these unforeseen circumstances.