Financing A Property For Your College Kid – Owner Occupied?
I have seen investors make hundreds of thousands of dollars buying properties for their college-age kids to both live in and rent out to roommates.
Many of them have been so successful in fact that I now think that every agent with clients with college-age kids should aggressively push this strategy.
The advantages are obvious. What would have been their own child’s rent is now going towards a mortgage, and there is an ample supply of renters/roommates looking for housing (and backed by the income and good credit of their parents) who will also help pay off the mortgage.
Further, having a child in the property ensures a slightly higher level of care (in most cases; if the child is, however, attending my alma mater – Arizona – all bets are off 😊).
Can Parents Buy Properties With Owner-Occupied Financing?
The big misconception that many parents have though is that they can buy properties with far superior owner-occupied financing simply because their child will live in the property.
That is not the case unless the child is also on the loan – and you can’t just slap your child on the loan, unless… (I will explain below).
Owner-occupied financing is more favorable than ever right now because of first-time homebuyer credits that Fannie Mae and Freddie now offer.
Owner-occupied financing not only allows for much smaller down payments, 3.5% for FHA and 3% to 5% for conforming, but it also offers interest rates that can easily be 1% or more LOWER than the rates associated with investor financing.
Establish Your Kid’s Credit In High School!
Heejin (my wife and co-founder) established her daughter’s credit immediately after high school by getting her credit cards and by adding her as an “authorized user” to several of our cards – and by the time she was a sophomore in college, she had sky-high credit scores.
It cost us nothing and it was easy to do. And I share this story because that is all any parent needs to do to add their child to a loan.
A kid does not need to have any income to be on the loan, but she does need to have decent credit.
So, all a parent needs to do to get top-notch owner-occupied financing is make sure her child has good credit by the time they buy a property.
So, every agent reading this blog should first ask their clients to establish credit for their college-age kids, and then tell them to buy properties for those same kids to live in.
Comments