Today's interest rates of for various products of 3.00% to 4.5% are amazingly low. For those of us that remember 9%, 11% and even 15% mortgage interest rates, today's interest rates are hard to beat.
When considering financing options for purchasing a condo for your son or daughter, one should determine how long they are likely going to own the condo. Will it be sold in 3-4 years after the child graduates? Is there a possibility that the child may stay in Boulder after graduation? Do you have another child planning to attend CU? Would you like to own it as an investment property after the child leaves Boulder?
The answer to these questions will help you determine what type of financing (long-term vs. short-term) that should be obtained. For example, if you will own the property for 3-4 years, you can obtain a 5/1 ARM for about 1percent lower than a 30 year fixed. This may not seem like much, but a lower interest rate will not only lower the monthly payment, there will be more principle reduction with each payment as well (2 benefits).
The down payment required to get the loan is another important consideration. In today's over lending environment on properties near CU, you will typically have 2 down payment options: Conventional Financing-20% down, Investor/Portfolio Financing-25% down.
Plan on 20% conventional financing to purchase a condo near CU if purchased as a owner occupied unit. Conventional financing offers very favorable rates and terms.
If the property will be non-owner occupied for 2 months or more (current lease in place) you will likely be required to obtain investment or portfolio financing. Down payments will almost always be 25%.
I have some very good, very experienced mortgage brokers available to assist you with these decisions and to make sure you obtain the loan. Getting a loan is not neccessarily hard these days, but it is far more complicated because of the requlations put into place after the housing bubble, especially in high inverstor areas such as we see near the University of Colorado, It is imperative that you work with a real estate broker and mortgage lender familiar with parent/student purchases.
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