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Parent / Child mortgage

26 YrOld daughter cannot get 30 yr fixed for first home(condo) purchase, only a 7/1 ARM, based on own credit due to limited credit history.  We parents have exceptional credit and liquidity and would like to help her lock in 30 yr $ at current rates and have no problem obligating ourselves.  Property would be primary residence for child but not parent(s).  Are there lenders that will do this - can it be securitized and sold?  Any recommended lenders we should contact?  I think our local CU intends to keep the loan which is why they will only due the 7/1 ARM.
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November 05 2011 - Town of Madison
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Profile picture for wetdawgs
You can cosign the loan with your daughter, but in the eyes of your credit report (and the lenders, of course), that makes you potentially 100% responsible for the loan should your daughter default.    

Cosigning is risky.     I have your daughter discuss with lenders what it takes for her to be eligible for the desired 30 y mortgage on her own and work towards that goal.
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November 05 2011
Not sure why they will only give your daughter a 7/1ARM but not a 30 year fixed. Have you spoke with other lenders if not please do so before you cosign. I know most parents want to help there kids but it is not always a good idea. Good Luck
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November 05 2011
You're correct Doug. Most credit unions only offer ARM programs because they portfolio their loans. If they do have a fixed program it usually isn't longer than 15 years.

As wetdawgs suggested, your daughter should consult a few mortgage brokers in your area. They are not limited to just a few programs from one source as your credit union.

Happy funding, Rudi
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November 05 2011
Yes, this is commonly available through Freddie Mac programs (best with 20% down) and also FHA (best if less than 20% down).

These loans are securitzed and sold every day.
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November 05 2011
Limited credit history is usually still an "approvable" loan as long as no bad credit. Your daughter could likely get approved for an FHA loan by herself.  Many Wisconsin credit unions do not offer FHA loans.

As was mentioned other co-sign options are available as well.  You can contact me my information is here on Zillow.
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November 05 2011

If your daughter can income qualify for the house or Condo(needs to be FHA financing eligible or a town home). Then it's possible with an FHA mortgage that she can obtain financing with limited credit history.  FHA Non-Traditional Credit Underwriting Guidelines require 3 or 4(without rental history) 12 month tradelines.  So if she has paid rent for 12 mos and 2 different utilities or some other installment debt for 12 mos she would be eligilbe for FHA financing. 

Assuming that option is available when my kids get older that's the route I would chose. I would not recommend co-signing. i have seen too many parents burned by kids who just decided one month that they wouldn't make the payment on time. If she doesn't have 12 mos history make that a goal and have her come back in 12 mos to get a loan.

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November 07 2011
At first I was going to say co-signing, but I might add on Mr. Hall's comment and ask if it's possible for you to buy the property as a rental. Then you could let her live there and pay rent as an intermediate step, while she builds up credit and rental history.
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January 12 2012
Hogwash... You can be a Co-Borrower to your Daughters loan as a Non-Occupied Co-Borrower. This is allowed for FHA mortgages. Very simple process. Cantact me if you have any further questions or concerns. Harry
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January 12 2012
 
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