<p>My family of 5 live in a semi-home with a combined income of 70k. I've applied to schools and have received a fair amount of aid from schools. However, my parents want to move out of this house (valued at around 120k, mortage fully paid) and sell it because it is too small. They have found this very cheap bigger house (valued at 190k) and want to buy it. However they do not know if it will affect my future financial aid. They think it will lower my financial aid because buying a new house will make our family seem like it has a higher financial strength than it really does. Is this right?</p>
<p>If you go to a FAFSA school the family home is not counted. Profile schools in general (varies school to school) tend to look at what you owe on the home and the value of the home…the difference is considered an asset…so it depends on your particular school, what forms they use to calculate aid and what that school considers when they do their calculations.</p>
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<p>Not exactly. But the sale of your current home will move the $120K in assets from protected to non-protected when you file FAFSA next year. Your family’s home is not reported on FAFSA, but cash is. There are lots of scenarios your family can consider.</p>
<p>Scenario 1: sell first house for $120K, buy new house for $190K, putting $120K down and borrowing $70K for the difference. Net effect for FAFSA: zero.</p>
<p>Scenario 2: sell first house for $120K, buy new house for $190K, putting 20% down ($38K) and borrowing the rest ($152K). You now have $82K in cash which will be reportable on FAFSA next year. Your parents will have an asset protection allowance, and their cash is “assesssed” at the rate of 5.6%, so the net effect for FAFSA of that cash would be around $1500. In other words, your calculated EFC will be increased by $1500 or so (run the calculation to figure the exact amount).</p>
<p>Other scenarios would involve putting more or less cash into your house, retaining more or less cash as savings. Your family will need to look hard at their financial situation to figure out how much cash they can affort to tie up in a house vs. how much they would like to have available to pay for college and other expenses. There’s no one-size-fits-all, but the calculation is easy to do using one of the online calculators.</p>
<p>For Profile, as momofthreeboys says, schools will consider equity of your home. Some will cap that equity at 110% of income, some use a Federal home value multiplier based on the year you purchased your home, some just use the reported equity.</p>