Off-campus housing costs have always been an issue for students, but a new loan option is lightening the burden by allowing relatives to co-sign on students’ mortgages.
The loan allows a first-time home buyer to have a co-signer who is a relative and not living with them. The co-signer is allowing their established credit to be tied to the loan, making it possible for a person without a credit score to acquire a loan.
Eleanor Thorne, who works at N.C. Mortgage Experts, said the loan is targeted toward students, both graduate and undergraduate.
The FHA loan is a mortgage loan developed in the 1980s by the Federal Housing Administration but has been rarely implemented until recently, Thorne said. After the 2008 housing crisis caused an increase in foreclosures, the administration made this loan available again because it is typically used to stimulate the housing market.
“Buy the home with a family member who does not have to live in the home,” Thorne said.
The loan does not require undergraduates to have a credit score or a job, Thorne said. She said graduate students must have a good credit score, preferably 620 or above.
The FHA loan requires a 3.5 percent down payment on the house, which is significantly lower than the 20 percent down payment required for a conventional loan. Conventional loans with a co-signer who isn’t living in the house would require one to declare the house as an investment property, which is why the down payment is so large.
Students can also build their credit score with this loan, which will help them later in life as they apply for other loans for future houses, cars or other large purchases.
The downside to this loan is that its insurance premiums are high, Thorne said. It has two separate premiums, one upfront and another paid monthly.
Matthew Lynch, a fourth year graduate student at UNC, said he thinks the loan is a good plan. Although the loan is not necessary for him, he said the lower interest rate is desirable.
“Moving off-campus will help build up your credit score,” Lynch said. “It is essential to build credit scores.”
With rental rates increasing each year, having the option to buy a house at an affordable rate is becoming more attractive to students.
Junior Levi Huffman, who is living in an off-campus apartment next year, said finding an affordable place to live was difficult.
“Houses are really hard to find, they aren’t close to campus,” Huffman said.
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