Modified House Hacking

[Ken Snyder]

My wife and I are early in our investing journey. While we aren’t likely to choose house hacking personally, is that route still a possibility, via bank lending, if we are co-owners with our son and his new wife as he goes to grad school, in essence using our credit and resources but benefiting from them living in one of the units, thus accessing owner occupied rates?

[David Martin]

@Ken Snyder Caveat emptor here, but yeah, as long as you all are on the loan as co-borrowers, typically all they care is that someone on the loan lives in the house. Note that being a co-signer and being a co-borrower are sometimes considered two separate things to a lender/underwriter, and you should make sure that distinction from them is clear. As a co-signer, you're typically acting as a non-owner guarantor of the loan, who does not occupy, basically saying you would backstop the loan in the event of default, where if you all are a co-borrower, everyone is on the loan equally with equal ownership. In these two flavors, one looks like "I'm trying to help my son buy a house for them to live in, and it's their house, and I'll cover the bill if something really really bad happens" vs. "My son and I, along with our spouses, are all buying a house together, and all promise to pay for it every month, and at least one of us will live in that place" to the lender. Both situations solve for occupancy, as the son, as one of the borrowers, lives in it either way, but a lenders underwriter may treat the two situations quite differently.