BOULDER – With the tight rental market in Boulder, instead of fully relaxing during the upcoming family weekend at CU-Boulder, many parents face signing a high-rent lease for their child’s off-campus housing next year.
But it doesn’t have to be this way.
Parents can get smart about their child’s college housing and offset the cost of college with a “Kiddie Condo Loan,” says Realtor Duane Duggan, host of the RE/MAX of Boulder podcast with his guest, Jessica Shanahan, loan officer from Premier Lending.
What’s a “Kiddie Condo Loan”?
Basically, instead of paying rent, you help your child buy a home.
“It doesn’t have to be a condo, it can be any kind of primary residence,” says Shanahan.
“If your child is coming to CU-Boulder and you want to invest in this amazing real estate market instead of paying rent for your child over four years,” says Shanahan, “a Kiddie Condo is a good alternative.”
Since the home is your child’s primary residence, down payment requirements are lower – from three to 10 percent – than the 20 to 25 percent required on investment property, she explains.
The lower down payment needed for a primary residence is one reason the “Kiddie Condo” plan is attractive, since the amount down can be an issue, adds Duggan.
If this sounds like a path you want to consider, you’ll be glad to know the process isn’t difficult.
Your child would be the borrower and you would co-sign the loan, explains Shanahan. With a co-signer in place, your child would have no income requirements, but your child will need a credit score, she says.
The easiest way to establish credit is to add your child to your credit card as an authorized user. Shanahan says this will give your child a credit score usually within 30 days. Another route is for your child to get a credit card and make monthly payments, but it takes longer.
Interest rates are the same as they would be on a primary residence. “The factors that determine your interest rate are the loan-to-value and your credit score,” adds Shanahan.
Shanahan says as long as the student is living there, it’s their primary residence, so there is no need to meet the occupancy ratio of a condo as would be required when you purchase an investment property.
While getting a loan for your child is not difficult, it does take some planning.
“A wise college-parent, when their child is a freshman, would come in for advice and start planning that credit to figure out how they are going to purchase a property the following year,” suggests Duggan.
You can see the full video podcast on RE/MAX of Boulder’s YouTube channel at: youtube.com/watch?v=-TG7Qhqna68.