Fannie Mae & Freddie Mac – Adult Child – Condo for College

Question:

My client’s daughter is 18, and they want to buy a condo for her to live in as a full-time student. Can I make this a primary residence for the daughter with her parents as co-borrowers, or is this a 2nd home or investment property?

Answer:

To some degree, this does boil down to lender/investor risk appetite. Still, both agencies support non-occupant co-borrowers with an occupying borrower but only when the adult child is also a borrower, regardless of income contributions from the daughter.

So if the daughter is not on the loan, then a lender could only treat it as 2nd home or investment property.

Please note that if the daughter does go on the loan, with or without income, but has no FICO scores, then this would not be an option because this option requires all borrowers to occupy the property, so you would have to go back to going as 2nd home or investment property, whichever your lender will support. Having no income as an occupying borrower is not an issue for the agencies, but not having a FICO score requires all borrowers to occupy.

Sometimes, this section of the selling guide is misinterpreted, and think that this applies, but it only applies if the child is handicapped or is a disabled adult.

Reference: Fannie Mae Guide Section – B2-1.1-01