College student housing 101, FHA 203b with non occupant co-borrower

The University of Oregon Ducks call Eugene home, but it is also home to Northwest Christian University, Eugene Bible College, Gutenberg College and Lane Community College. One of the biggest college expenses is housing for your student. College is expensive and Oregon was way down on the list of affordable college states, so how about a way to make, at least, housing more affordable?

Now, there are some requirements that will go along with this, but let's talk about what you can accomplish first and then go over some of the things that have to go together. First, I want to use a "real life" example of a home for sale. For this, I have chosen a home listed by Gary Johnson with 7 Gables Real Estate, 541-510-5073.

The home is listed for $170,000 and is located at 1202 Quinalt St. It is 3 bedrooms and 2 baths and the seller will pay closing costs up to $5,000. It has an attached garage and storage/garden shed. For more information about the property, check with Gary, 541-510-5073 or swede4440@msn.com.

Using my handy dandy "rentometer" that will tell me if a comparable apartment in the area is priced right, it appears that about $1000 per month is pretty average (for an apartment.) So, using an FHA 203b program to purchase the home in the student's name with the parents as "non-occupant" co-borrowers, let's compare the rent vs. buy on this home with 3.5% down payment. We are also assuming a 25% tax bracket and no appreciation on the home during a 3 year period.

Purchase Rent

Price $170,000 n/a

Monthly Payment (PITIMI) $ 1,142 $1,000

Tax Deductibility $ -205 $ 0

Adjusted Payment $ 937 $1,000

Payment Difference $ -63 - Assumes no rent increase -

Mortgage Balance $158,915 $ 0

Mortgage Reduction $ 4,285 $ 0

(Includes Down Payment Return)

I have calculated this with a 5%/5.853% APR* FHA rate but it will work at a higher rate. Imagine what could happen with even a slight appreciation in value.

So, what are the requirements: First of all, the buyer (student) must have some credit and it would help if they had some income, not matter how small. Second, the co-borrower must have sufficient income to make the debt ratios work when added to their current debts. Third, there has to be down payment coming from somewhere, it isn't even a gift if it is coming from the co-borrower. Finally, get pre-approved for the loan, preferably with me, make an offer on a property and start saving money.

Students attending or going to attend the University of Oregon should call me to discuss this program to assist in paying for your student housing. Any other college or university in Oregon, Washington or California I can help you with also. The FHA 203b home purchase program is a great way to help pay for college. First time homebuyers are especially valued for this program.

*Rates and terms subject to change without notice. Maximum loan amounts vary by state, county, and property type . Subject to review of credit and/or collateral; not all applicants will qualify for financing. It is important to make an informed decision when selecting and using a loan product; make sure to compare loan types when making a financing decision. OR License #ML-4832.

Authored by Fred Chamberlin, senior mortgage consultant, Eugene/Springfield Oregon, 541-342-7576.