College Parents Benefit From “Kiddie Condo Loans”

Despite its relative obscurity, a great investment tool for college bound students is growing in popularity among savvy college parents. The FHA loan program, affectionately nicknamed “Kiddie Condo Loans”, is one of the best programs out there to help jump start a student’s credit and provide a low down payment option for cash strapped parents to purchase a home for their son or daughter.For details on the loan program, I went to Steve Beecham, President of Hometown Mortgage in Alpharetta, Georgia. Steve’s excitement over the program is evident as he explains, “There are few programs, if any, left in the market place where a co-signer doesn’t have to live in the property.” The bottom line is a college bound student can qualify, with a parent’s help, for as little as $500 down.The FHA program actually requires three percent down. However, that three percent can come as a gift from several different places, such as:1. A relative by blood, marriage, or law2. The borrower’s employer3. A charitable organization4. The seller (can give up to six percent)One easy source for the funds might be the Nehemiah Down Payment Grant. This is a charitable organization that will fund up to six percent for the purchase; three percent of which can be used for the down payment and three percent which can be used for closing costs. Your mortgage lender would fill out the paperwork on your behalf. Six percent would be written into the purchase price as a contribution to Nehemiah. The organization in turn, at closing, gives all of it back to the seller, less a $500 contribution from the buyer. So, the net out of pocket from the buyer is the $500.Obviously, there are some ground rules for the program, some of which are:1. At least one of the buyers (usually the college student), must occupy the home. But extra bedrooms can be rented out to help defray the costs of the mortgage.
2. Qualifying guidelines are based on the student’s and the parent’s credit and income. Generally, both parties must have a credit score of at least 580.
3. If it is a condo, then a majority of the condos in the complex must be owner occupied.Also, don’t let the nickname fool you. This program can be used on virtually any property, not just condos. And, it can be used up to a maximum loan amount of $346,000 for homes inside Metro Atlanta.

Should College Loans Be a Hindrance to Education?

In today’s professional world, higher education has evolved into a social norm. If you want to earn more money, you have to go to school longer and build up your credentials. In fact, a bachelor’s degree in today’s culture is equivalent to a high school diploma years ago. Of course, pursuing post high school education involves more than grades, and ambition, it is heavily influenced by financial capacity.Many high school graduates, even the top ranked students, are forced to take on blue collar jobs because of financial constraint. Sure, there are many scholarships available, but are fairly limited. Now, issues arise with the role the government should play in assisting students in continuing their education to strive for their dreams. Many people are failing to look at the financial rewards, as well as other perks of getting a higher level education. Many students want to avoid taking out loans, but are they really that burdensome down the road?Just imagine you’re an average kid that just graduated from high school. You got into an average university but cannot afford the tuition. You don’t qualify for any scholarships or grants. Now what? Do you feel too intimated by loans? You shouldn’t be and here’s why.In the long run, most people work to earn money to support their families. Well the good news is that there is a strong correlation between education and earnings. In fact, this correlation is true for ALL racial groups and men AND women. Well what if I start working immediately out of school, won’t that be financially better than going to school for at least four years and paying all that tuition? WRONG! Studies show there is an increasing earnings gap between high school graduates and college graduates. Thus, the life time earnings of an average college graduate far exceeds the life time earnings of an average high school graduate, even taking education costs into consideration. So financially, you are well off.What else can you get from a college degree? Studies show that low unemployment rates and poverty levels are linked to higher education. Basically, the government is able to collect more tax revenue from you, but you’re still able to live a happy, healthy live. With more government support, comes more societal gain and increased quality of life since the public sector is able to support its citizens, including you. Keep in mind, you don’t have to be a genius, these studies pertain to the average person.Let’s look at numbers. According to the U.S Census Bureau, the average after-tax income, in dollars, is as follows:Professional Degree – 74,500
Doctoral Degree – 59,500
Master’s Degree – 46,600
Bachelor’s Degree – 39,000
Associate Degree – 31,500
Some College – 29,000
High School Graduate – 24,900
Some High School – 18,800As you can see, there is an upward trend with education. The difference between a high school graduate income and college graduate income is almost 57%. Now you ask, I cannot afford college; I would have to take out a loan. Data by the U.S. Census Bureau shows that cumulative life time earnings net of loan repayment of a college graduate is close to 33% higher than a high school graduate.In fact, analysis by The College Board shows that “by age 33, the typical college graduate who enrolled at age 18 has earned enough to compensate for borrowing to pay the full tuition and fees at the average public four-year institution, including interest on student loans to cover those charges, and earnings forgone during the college years.” Along with financial gain, studies show that jobs for college graduates cover a greater percentage of health insurance.These days, at least from my experience with friends of mine who took out loans, they aren’t very costly. Some companies will offer you interest free loans for years after graduation, and only charge a fixed cost, say $500 for the service. So instead of paying a ridiculous amount, say nearly 1.5 times the initial tuition, your only paying about .5% more (the average private four year tuition is about $25,000 per year).Of course, you may easily think of examples that show the contrary. Remember, this analysis is based on an average. There will of course be exceptions, which are most likely outliers, and represent an extremely small percentage of the population. As long as you have the ambition to complete your education, your investment will pay off. Think of education as an investment, not expenditure.People will say your undergraduate degree means nothing, but in reality, it has a lot of value. Your career path may be nothing compared to the writing on your degree, but it carries wealth, prestige, and a respectable quality of life.