Two of the most expensive commitments that the average American typically makes are earning a college education and buying a home. Did you know that there’s a way to combine these two commitments to save big in the long run?
In the blog below, I’ll share three tactics that you can use to buy a home in college, buy a home for your child as they go to college, and prepare them for the future with equity and better credit.
Buying a Home While In College
One of the most common paths for college students when it comes to residential life is to rent a home or an apartment once they’re done with dorm life. But did you know that it’s possible to buy a home while still in college?
No, students don’t need to go get two extra jobs on top of all their classes. In fact, there are certain types of non-qualifying mortgages that allow individuals to buy a primary residence—a home that they’ll live in full time—without any income.
Now, how is this possible?
To qualify, a non-occupant borrower—someone who is also on the loan but won’t live there—will be needed. This could be a parent or another family member. Perhaps most importantly, you’ll also need at least 3.5% for the minimum down payment and a credit score which meets minimum standards.
Save On College Housing
On average, the cost to live in a dorm range between $8,000 and $15,000 a year. And believe it or not, off-campus rent costs even more. Yeah, something’s got to give.
For my parents who are sending children through college, rather than renting a home for your child throughout college, you could buy one with them.
There are loan types that will allow for a non-occupant co-borrower (aka, the parents) to be the primary source of income needed to qualify for the loan that buys a home which someone else (aka, the student) will live in.
Using this strategy could also lock you in to a lower interest rate and would require a smaller down payment.
This would not only ensure that your child has stable living throughout college, but also a way for you to build equity which can offset the costs of sending a kid through college. Plus, you can rent the other rooms to their friends for some extra income. And when they graduate, you can sell the home or keep it as a rental property to continue to generate passive income.
Building Your Child’s Credit
A college education is one of the most popular ways to set up your child for long-term success in life. But what about a head start on a strong credit history?
35% of your credit score is credit history, making it a big factor in having a high score. However, it takes some time to build up; you need years of on-time payments to maximize this part of the credit score calculation.
Luckily, there’s a shortcut that you can utilize. It’s such a great tactic, that I’ve even done it for my children.
If you’re an authorized user on someone’s account, you’re able to piggyback on their history. So, what you can do is add your children to the credit cards you’ve had the longest and which have a perfect pay history.
In my case, these are cards that I rarely use, so the debt utilization is low, which also leads to a higher score.
This way, when they turn 18 and can open their own accounts, they’ll already have a head start.
It’s important to work with a loan originator that you trust to make sure that you’re fully prepared to make these steps. If you think any of these three strategies I’ve outlined above might work for you and your children, reach out to a member of my team! We’ll be more than happy to help.