Mortgages That help Junior Through College

By Sheryl Landrum
CMR Columnist

I recently had a client who was purchasing a condo for his daughter and her roommates to share as they went to school at a local university. He asked me about "kiddie condo mortgage loans" and I told him I had not heard the term before but would check into it. This is what I learned.

Kiddie condo mortgage loans are an FHA product (which is probably why many California lenders are not too aware of them--our home loan values are often too high for FHA loans) that is designed to help parents provide housing for their children without the added cost of an investment home loan. FHA home loans do have limits on the mortgage amounts they will insure; in San Diego, the loan amount is $362,790 and if you need a mortgage loan over 80% loan to value there is an annual PMI (private mortgage insurance) fee of .5% and an upfront fee of l.5% of the mortgage loan amount. The only good news is that PMI is now tax deductible. So, is there an alternative to a kiddie condo loan?

Yes, I put my borrower into a second home mortgage loan and not an investment loan to buy the condo. There was no extra charge for the second property and no government restrictions either. While there can be some restrictions for a 2nd home (most lenders like it to be 35-50 miles away from your primary residence) the lenders I spoke with had no problems with the actual scenario and agreed to treat it as a second home. Remember, if you have a mortgage loan situation that seems "out of the box," call your lender or loan officer today; you may just have more alternatives than you realize.

About the Author
Sheryl Landrum is a Senior Loan Officer with Charter Funding, Inc. in Carlsbad, California and a freelance writer specializing in mortgage issues.

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