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Options for Buying for a Child; Blended Ratios; Co-Signing

Often, when rates dip in response to “World Crises” (Japan, Libya, etc.), the reduction is short-lived. So we are recommending locking rates right now.

We have numerous parents looking to buy homes with or on behalf of their children (or other relatives).

There are three options for a well-qualified parent:

(1) buy the property as an investment property with 20% down;

(2) buy the property as a co-signer with FHA financing with 3.5% down; or

(3) buy the property as a co-signer with conventional financing with 20% down.

With Option #1, the child’s qualifications are irrelevant, but the rate will be about 1/2 percent higher (for “investment property” rates)

With Option #2, the child or “occupant” must have a credit score of at least 620, and only enough income to augment the parents’ income if the parents do not have enough to qualify by themselves.

With Option #3, the child or “occupant” must have a credit score of at least 680, and only enough income to augment the parents’ income if the parents do not have enough to qualify by themselves.

We always recommend “Co-Signing” whenever possible b/c the rates are so much lower for “owner occupied properties”, but sometimes the child’s credit is just too bad or over-loaded and the parents have to obtain investment property financing.

Another name for a “co-signer loan” is a “blended ratios loan” b/c lenders blend all the income and all the debts of all borrowers.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167