- Personal Finance
FHA Kiddie Condo Loans Are A Great Mortgage Option
The FHA Kiddie Condo loan is a purchase mortgage option that has been very popular for a while, and with good reason. Essentially it allows parents who have children in college to buy their child a home to live in rather than throwing money down the drain on rent (and by the way, while the FHA loan is called ‘kiddie condo’, the property you buy is not limited to just condos).
The beauty of a situation like this is that your student can have roommates paying you rent, thereby covering at least part, if not all, of the mortgage payment. With mortgage rates extremely low right now, as well as housing prices being very depressed in a lot of areas, it makes it a great time to be buying property. And unless you want your child moving back in with you once they’re done with school, they’re going to need a place to live anyway.
If they choose not to stay in that property when school is all said and done, you can have the option of either continuing to rent it out as either student housing or just regular housing, or else you could just sell it. The hope is that the general economy, and the housing market in particular, will have turned by then. Therefore even if you don’t make a lot in the way of profit like people did a few years ago, there is a decent chance you’ll pocket at least some gains. And don’t forget all the money you save while you have it; not paying rent to the school or a landlord as well as (hopefully) having a good chunk of the mortgage paid by the roommates. Finally, you will be helping you child to build a good, solid credit history which, along with their college education, will help them tremendously along life’s path.
To Get This Kind of Mortgage, Your Kid Needs To Have Good Credit Too
However, speaking of credit, your child will need to have some credit – some decent credit – for this FHA kiddie condo to work in the first place. In fact, they will need a FICO score of at least 620 in order to qualify. So if your child has no official credit yet, it would be very wise to get them to start establishing it as soon as possible. There are a number of ways to do that.
Credit Cards to Establish Your Credit
Credit Cards – I’m sure a lot
of parents panic at the thought of giving a child a credit card.
However, like so many other things in life, if it’s used properly, it’s
not a bad thing. It’s like driving a car; if you’re a careful,
responsible driver, a car is a great thing to have. If you’re careless
and wreckless, a care is a horribly dangerous thing to have. You as a
parent need to be sure your child is ready (trained) for
responsibilities such as cars and credit cards. If they are capable and
prepared, sheltering them by letting them use your card of simply not
allowing them to have a card of their own is doing them no long term
favors. Show them how to use the card to make one or two essential
purchases each month and then pay off the balance. This will begin to
get their credit history established.
Get a car loan – I know
some parents feel their kids ‘deserve’ a car and they want to gift one
to them. That’s all very nice and generous, but again, it’s really not
doing the kid as much good as it could. If you allow them to get a car
loan in their name, once again they will begin establishing a credit
history. If you want to help them with the down payment or even help
them with monthly payments, that’s OK. But make sure the loan is in
their name so they can get that credit history set up properly.
Cell Phone Bill
a cell phone – Again, many parents ‘gift’ a cell phone (and a cell
plan) to their kids because in today’s world, they have become more or
less a necessity. Still, just like the car loan concept, let the bill
be in their name. Explain the reasons why you’re doing this and let
them see the bill (realize that there actually IS a cost to all that
talking and texting!) Maybe offer to help with the bill, but let them
participate in it. It will not only give them good life lessons, but
once again, it will help to build that credit rating.
Obviously, with all these suggestions on building credit, it is critical that your child manage their bills properly. The only thing worse than having NO credit is having BAD credit. And remember, they're going to need at least decent credit - 620 FICO - to be able to get on that kiddie condo FHA mortgage loan.
Help put them on the right path of financial responsibility and it will pay for itself many, many times over throughout their lives.