New construction continues to be a major part of the housing market across Bryan, College…
Can Parents Buy a Home for Their Texas A&M Student?
A Texas A&M home purchase is something we talk through with families all the time. Instead of paying rent for several years, parents sometimes start asking whether it makes more sense to buy a house, townhome or condo for their student in College Station.
Buying can be a smart move in the right situation. My job is to explain the financing options and show the family the numbers so they can decide whether it makes sense for them.
“I don’t ever try to convince anybody that it’s worth it or not. I stick to the facts, run the numbers, educate them on the options and let them make the decision.”
— Bryce Kennemer, Guarantee Mortgage
In practice, there are two main ways we usually look at financing a home for a Texas A&M student: structure it as a primary residence with the student occupying the home, or have the parents purchase it as an investment property.
Option 1: The Student Buys the Home as a Primary Residence
If the student will own and occupy the home as a primary residence, we first look at whether they qualify with or without a parent as a co-borrower. The financing must reflect the actual ownership and occupancy plan.
This can be attractive because primary-residence mortgage programs generally offer better pricing and lower down-payment options than investment-property financing.
The student does not necessarily need enough personal income to qualify for the mortgage on their own. In many of the files we handle, the student is the occupying borrower and the parents are added as non-occupant co-borrowers so their qualifying income can be used for the loan.
The student still needs to satisfy the applicable borrower and credit requirements, and the exact structure depends on the loan program and underwriting findings.
“If the child is going to live there, that’s usually the first structure I want to look at. We may be able to treat it as a primary residence and use the parents as non-occupying co-borrowers. That can make a pretty significant difference in the financing.”
— Bryce Kennemer
Depending on eligibility, an FHA purchase with a qualifying parent as a non-occupant co-borrower may allow 3.5% down. Certain conventional options may allow 5% down. These are program-specific examples; credit, property type and underwriting requirements can mean a larger down payment. Closing costs and any required reserves are separate.
Fannie Mae, for example, permits non-occupant borrowers on eligible principal-residence mortgages subject to its program requirements. You can review Fannie Mae’s current non-occupant borrower guidance here.
The Tradeoff: Your Student Now Has a Mortgage
The lower-down-payment option is not automatically the right answer for every family.
If the student is a borrower on the mortgage, they are responsible for repayment, and the debt can affect future borrowing. Parents who sign as co-borrowers also share responsibility for the loan; they are doing more than helping the student qualify.
Some parents hear the primary-residence option, look at the difference in down payment and rate, and immediately like it.
Others tell me right away, “No, I don’t want the mortgage in my child’s name.”
Neither reaction is wrong.
I show the family the difference in cost so they can weigh the financing benefits against their preference for keeping the mortgage out of the student’s name.
Option 2: The Parents Buy It as an Investment Property
The second route is for the parents to purchase the property as an investment.
That may make more sense when the parents want the property solely in their own ownership structure, expect to keep it as a rental, or want to close in an LLC where the loan program permits it.
For the investment-property options we commonly evaluate, 20% down is a common starting point. The required amount may be lower or higher depending on the lender, credit profile, property and program.
The rate and overall terms are also generally different from primary-residence financing.
For some families, the additional down payment is worth it because they prefer the investment-property structure.
“Sometimes I explain the primary-residence option and the parents immediately say, ‘No, I don’t want to do that. I want this in an LLC and separate from my kid.’ That’s fine. Then we’re looking at investment-property financing and sometimes a DSCR loan instead.”
— Bryce Kennemer
Before considering a DSCR loan, we need to confirm that the lender permits the planned occupancy. Some DSCR programs prohibit a borrower’s child or other family member from living in the property, even if they pay rent. An LLC does not remove that restriction.
Can Roommate Rent Be Used to Qualify?
This is one of the most common questions we get because many Texas A&M students will live with roommates.
For the typical one-unit primary-residence scenario, families should not assume that rent from future roommates can simply be added to the student’s income to qualify for the mortgage.
There are limited program-specific situations involving established boarder or rental income, but a family buying a house for a student should not build its qualification strategy around rent that new roommates are expected to pay.
“On the typical primary-residence student purchase, I’m not counting the future roommates’ rent to make the deal work. If we’re doing it as an investment property, that’s different — eligible rental income can absolutely become part of the financing analysis.”
— Bryce Kennemer
On an investment-property transaction, eligible rental income can often be considered, subject to the particular loan program and required documentation.
For an eligible debt service coverage ratio (DSCR) loan, the lender compares qualifying rental income with the property’s housing expenses, including principal, interest, taxes, insurance and applicable HOA dues. The lender still reviews credit, assets and property eligibility.
Be Careful With Condos Near Texas A&M
Condos are popular around Texas A&M, but this is one area where I tell families to send me the address before they get too far into the deal.
With a single-family home, most buyers understandably focus on whether they qualify for the mortgage and whether the house appraises.
With a condo, we may also need to evaluate the condominium project itself.
Depending on the financing, lenders can review things such as the HOA, insurance coverage, project finances, ownership concentration, litigation, structural issues and other project characteristics.
A condo project that does not meet conventional agency requirements may be described as non-warrantable. That does not necessarily mean financing is impossible, but it can change which lenders and programs are available.
“The condos can get tricky depending on the project. I always tell parents: send me the address. Let me look at the condo before you assume we’re good to go, because some projects around here can be non-warrantable and that changes the financing.”
— Bryce Kennemer
Fannie Mae maintains specific project-eligibility standards for condominium financing. Its current condominium project guidelines are available here.
Should Parents Buy or Just Keep Paying Rent?
I don’t think a mortgage company should answer that question for you.
There are legitimate reasons a family might buy, and legitimate reasons it may prefer to rent.
If you are evaluating the purchase, I would look at the entire picture:
- How much cash will be needed for the down payment, closing costs and reserves?
- What will the monthly principal and interest payment be?
- How much will property taxes and homeowners insurance add?
- Are there HOA dues?
- What should the family budget for maintenance, repairs and periods without paying roommates?
- How long does the student expect to live there?
- Will siblings attend Texas A&M later?
- Will the family sell after graduation?
- Would they keep the property as a rental?
- What would it cost to sell the home later?
Home values in Bryan–College Station can rise or fall. I would compare buying with renting without relying on appreciation to make the numbers work.
What Happens After Graduation?
A family that expects to sell after graduation should evaluate the purchase differently from one that plans to own the home for ten years. Closing costs and future selling expenses matter more when spread over a shorter period.
Some families expect to keep the property for another child. Others want to turn it into a full rental. Some expect their graduate to stay in College Station. Others know from the beginning that they plan to sell.
Knowing the plan after graduation helps us compare the financing options and the expected cost of ownership.
How I Would Approach a Texas A&M Home Purchase
If a parent calls me about buying a home for a Texas A&M student, I would not start by telling them which loan they need.
I would start with a few facts:
- Who is going to live in the property?
- Whose name do you want on the mortgage and title?
- Does the student have established credit?
- How much money do you want to put down?
- Is the property a single-family home, townhome or condo?
- Will there be roommates?
- What do you plan to do with the property after graduation?
Once we know those answers, we can compare the financing options the family and property qualify for, including the down payment, monthly payment and ownership requirements.
“I’m here to present the facts. Here is what the primary-residence option looks like. Here is what the investment option looks like. Here is the difference in down payment, payment and structure. Then the family can make an educated decision.”
— Bryce Kennemer
That is the approach we use with families buying around Texas A&M every year.
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Learn about investment-property financing →
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