FHA "Kitty Condo"

A great way for young adults to get started buying their first home is by using the FHA "Kiddie Condo" Loan Program. 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 and sign for the loan.

There are three big advantages to using this type of loan.
1. A low downpayment (as little as 3% of the purchase price).
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 could 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 unable to obtain a loan on his/her own to buy a condo or townhome or single family home with the help of a family member.

The tax benefits, such as deducting mortgage interest and real estate taxes on a Federal Income tax return, can be divided among the owners, according to who pays the expense. See your tax advisor for details.

Make sure you read the section on credit as both borrowers must qualify.  If the owner occupant has little or no credit you should review the "non traditional credit" section and pay particular attention to the information on the 2nd page.

Note that the property DOES NOT have to be a Condo. If it is a condo then you need to make sure that the project is approved or the that the property can get a "Spot approval".