Las Cruces, home to New Mexico State University (NMSU), presents a unique opportunity for parents considering housing options for their college-bound children. With 22 other college towns in New Mexico facing similar housing demands, many parents and grandparents are exploring the possibility of purchasing a home rather than renting.
One significant hurdle for parents is the substantial down payment required when buying a property they don’t intend to occupy. Typically, lenders categorize these buyers as investors, necessitating a down payment of at least 20% of the purchase price. However, the FHA Kiddie Condo loan offers a solution, requiring only a 3.5% down payment. This loan allows a parent and child to co-sign, with the child living in the property, leveraging the parent’s credit and debt-to-income ratio.
The Kiddie Condo loan is versatile, applicable to single-family homes, townhomes, warrantable condos, and even manufactured homes taxed as real estate. Eligible co-borrowers extend beyond sons and daughters to include siblings, stepchildren, grandparents, nieces, nephews, and even unrelated individuals with a substantial, family-like relationship.
Concerns about property value appreciation are common, but the National Association of Realtors’ Rent vs. Buy calculator suggests that purchasing a $250,000 home in Las Cruces’ 88001 zip code is more economical than renting after two years. This calculation assumes a 3.5% down payment, a 6.0% mortgage rate, a 3.0% inflation rate, and a $1,800 monthly rent. Additionally, renting out rooms to roommates can further reduce ownership costs.
Parents considering this option should have a candid discussion with their children about their educational commitments, as unexpected changes, like joining the Peace Corps, could impact the investment. Nevertheless, current market conditions make this an attractive option for many families.
Exploring the Kiddie Condo Loan
The FHA Kiddie Condo loan is a strategic tool for families looking to invest in their children’s education while potentially benefiting from property ownership. It’s important to assess all factors, including the student’s educational plans and the local housing market, before making a decision.
For those interested in exploring this option further, consulting with a knowledgeable real estate professional can provide valuable insights and guidance.
Gary Sandler, a U.S. Air Force veteran and full-time Realtor, is available for questions and can be reached at (575) 642-2292 or [email protected].
Original reporting: Las Cruces Sun News (HLL/CB) — read the source article.
