FHA's non-occupant co-borrow program is nicknamed the "Kiddie Condo" program. But it's much more. Learn five facts about this loan that could help you with your next new home loan or mortgage refinance.

FHA's "Kiddie Condo" Program: Five Things You Need to Know

There's a new trend sweeping the nation. Parents are opting to buy their college students their own digs instead of paying rent for dorms or off-campus housing. Cheap real estate, low mortgage rates, and high room and board fees charged by schools make this a viable investment for many. Parents often choose FHA's "kiddie condo" plan to make this investment dream happen. But it's not only for college students and their folks--here are the facts on this program.

Fact #1: You Don't Have to Buy a Condo

Yep, "kiddie condo" is just a nickname. You can finance a lot of different properties with this loan--a house, condo, even a manufactured home. However, it does have to be a single-unit property. This is to keep people from using the program to buy what is essentially investment property (you couldn't live in all the units of a fourplex, could you?). FHA will let you buy a duplex, triplex, or fourplex, but then you can only finance up to 75% of the property's value. However, college students (and regular humans, too) are free to have roommates and charge them rent.

Fact #2: The Co-borrower Doesn't Have to Be Your "Kiddie"

FHA normally does not allow non-occupying co-borrowers on loans exceeding 75% of the property's value. But blood is thicker than underwriting guidelines: you can get the maximum financing of up to 96.5% if your co-borrowers are related by blood, marriage, or law (spousal types, parent-types, kids, brothers and sisters, step-kids, aunts and uncles--even "weird" uncles--etc.). But wait, there's more--even unrelated people who can prove they have a "family-type, longstanding, and substantial" relationship can get a "kiddie condo" new home loan or refinance mortgage together.

Fact #3: You Can Use it to Dump Your Ex

Say you're going through a divorce. The judge orders you to refinance your mortgage and remove your ex's name from the home loan. But refinance mortgage lenders won't approve you because you don't have enough verifiable income. You could call your parents--they always hated the him/her anyway, right?--who can put their names on the house and loan and help you get approved, make the judge happy, and get your home clear of your past.

Fact #4: All Borrowers Have to Qualify

All borrowers must sign the note and agree to the terms of the loan. And everyone--whether they will be making the payments or not--has to pass a credit check. For college kids with a limited credit history, you can add them to accounts as authorized users and let them "piggy-back" on your good credit rating. This is only allowable for relatives. Or, your kid can use non-traditional credit--cell phone bills, internet service bills, or auto insurance payments to create a credit report.

Fact #5: Whoever Makes the Payments Gets the Tax Deduction

This becomes a factor when one borrower, such as a parent, is in a higher tax bracket than the other, or one borrower itemizes deductions (and could therefore take advantage of the deduction) while the other doesn't. The IRS is clear--whoever writes the checks takes the deduction. So work that out between yourselves before tax time.

In short, "kiddie condos" can help anyone with a special relationship give someone a hand--not just kiddies and the parents who want them out of the house.