(PRWEB) December 8, 2005 -- Smart money managers struggling with a way to pay college tuition and living expenses for children at University are increasingly turning to real estate as the investment of choice because of its short-term convenience and long-term rewards.
“Kiddie Condo” loans, so named because the mortgage product used to purchase real estate for this purpose is encouraged by a Federal Home Administration (FHA) program that allows parents, grandparents or aunts and uncles to purchase real estate and share the risks and rewards of the investment with the student. Students can immediately begin building their credit history with timely mortgage payments while the parents or other benefactors are building equity and avoiding the waste of paying rent and other expenses.
This type of mortgage allows a person to co-borrow with a blood relative (eg. parent, grandparent, sibling, etc.), who helps qualify for the loan using their income or assets. Both borrowers take title to the property, sign for the loan and build their credit profile.
Donna Larson, a mortgage specialist with Primary Residential Mortgage, Inc., in Mesa, Arizona, recently bought a unit for her daughter, Kristin, age 19, in downtown Tempe, Arizona at "The Vale," the Will Bruder designed 40-unit condominium development recently completed on University, east of Hardy. Already the unit has seen a substantial rise in market value, as evidenced by a recent resale in the building, which realized a greater than 40% gain for the seller.
In Arizona, there are still many affordable condos and townhouses near colleges and universities that could be purchased under this federal program and single-family dwellings can also be purchased with this mortage loan. The FHA loan limit for this program is $237,500 for Maricopa County.
There are a variety of other local programs available for parents wishing to invest in their children’s education
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According to the FHA, the "kiddie condo" rule can be applied for children who are currently in school
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(and may have no source of income) or with children who are in the workforce. Debt-to-income ratios are calculated utilizing the income and debts of all borrowers. Despite the name, this solution does not require that the property be a condominium and the age of the "kid" does not matter. In fact, this solution can be utilized for a child borrowing up to the FHA maximum mortgage. As of NOVEMBER 2005, the Phoenix area mortgage limit is $237,500.
There are three big advantages to using this type of loan.
1. A low down payment (as little as 3% of the purchase price). The 3% down payment can be 100% GIFT.
2. A lower, owner-occupied interest rate on the mortgage vs. the higher investment property interest rate.
3. Helps the new borrower establish a solid credit rating.
With a Kiddie Condo loan program, at least one borrower must occupy the property as his/her primary residence, but extra bedrooms can be rented out to help cover the cost of the mortgage payments. This is a perfect way for a college student, recent graduate, or anyone otherwise unable to obtain a loan on his/her own to buy a condo, town home or single family home with the help of a family member. The ability to deduct mortgage interest and real estate taxes on Federal and State income tax returns are an added benefit. (Consultant a tax advisor).
About PRMI and ArizonaMortgageFinders.com:
In addition to our correspondent banks, we have relationships with over 110 private lending sources that offer lending solutions to address special, non-standard financial situations such as: Stated Income Loans, No-Doc Loans, Bank Statement Only Loans, Resident Alien Loans, First Time Home Buyer Loans, 80/20 Financing, and much more.
Donna Larson, Mortgage Consultant, PRMI
Primary Residential Mortgage, Inc.
1761 E. McNair Dr., Suite 101
Tempe, AZ 85283
Tel. (480) 217-2572
Fax: (480) 897-7316