FHA Home Loans have a provision that allows family members to more easily help each other out in the home buying process. They allow family to provide gifts for down payment, closing costs and to pay debt off in order to qualify for the new home.
FHA Home Loans also have a way for family members to actually go on the mortgage loan, lending their established credit and work history – this is commonly referred to as a “kiddie condo.” It doesn’t mean that the person living in the house has to be a “kid” – nor does the property have to be a “condo” – it’s just an old FHA Loan “Industry” slang term.
Kiddie Condo Loans refer to a FHA provision that allows for non-occupying co-borrowers. Parents like us, with kids in college, come out a LOT better owning a unit with the student, and renting it back out. We’ve done many of these for our friends – and most of them were NOT condo units. It’s just an industry slang term for the loan that only requires a minimal investment (less than 5% normally covers all costs), and does not require the student to be employed full-time – or have a credit score established.
We used this program for a family that moved here and wanted their dad to live in Cary. Their mom died a few years earlier – and her illness pretty much wiped out their dad’s cash… He also didn’t have a ton of income. Using the non-owner occupied co-borrowing of the FHA loan, we were able to get Grandpa a loan in a nice ranch near their home! He could live independently – and everyone was happy!
Wondering how Social Security Income works with FHA? Well, we can gross it up 115%! So if you need the Social Security income to qualify with another family member – that’s allowed.
Remember, this program works great if INCOME is the issue, not credit. If the reason you can’t qualify is due to poor credit ratings – a co-signor is, unfortunately not going to help. This is also a really great home loan program for single parents, who need some interim help!
We’ve also used the FHA co-signor program for Graduate students who can’t imagine studying AND living in a College Apartment one more year! The FHA Non-Occupying Co-Borrower program allows for a minimum down payment of 3.5% – but again, the person who is going to live in the house needs a minimum credit score of 620.