<p>My parents own a second house that is worth less than what they owe. My parents bought this house a couple of years ago when I was still in elementary school hoping that it would help pay for college. However, the financial situation of my family has taken a turn for the worse and this house is actually hurting us financially. How will this affect the financial aid I get in regards to FAFSA and also schools that require the CSS Profile? Thank you</p>
<p>You are far from alone in this regard…do you use this as a rental property?</p>
<p>Yes it is rental property</p>
<p>You only have to claim the value of the home (worth less any mortgage still owed on it). If it is worth less than they paid, that is not the same thing as it being worth less than what is owed, of course. If it’s worth less than they paid, they still have to state the current worth as an asset (unless, of course, total assets are less than the asset threshold, in which case the FAFSA lets you skip reporting the total). For Profile, you just consider it 0 if they owe more than it’s worth. You may be asked for proof of the worth & the mortgage amount outstanding.</p>
<p>I’m not completely sure what the exact numbers are but if my parents bought the house for lets say for example $200,000 and now it’s worth $100,000 but they still owe $130,000. Is it still considered an asset? Thank you for the help.</p>
<p>For financial aid purposes, your value for that upside down mortgage home will be $0 in the scenerio you pose. I don’t believe you can put negative amounts in the forms. $0 is the lowest you can put. Yes, you must still list this property on your financial aid forms.</p>
<p>Ok and will the fact that my parents own this asset have any effect on the aid I get even if the value is $0?</p>
<p>Sorry about all of the questions but I’m a first generation student and the financial aid process is confusing and thank you once again for all of the help.</p>
<p>I honestly can’t say what the finaid folks will do…but seems to me that if the asset is worth $0, there isn’t much to tap into for college costs. But remember the house still HAS a value. It’s just that your parents owe more right now than the value of the home.</p>
<p>Oh ok I understand now and how is rent money taken into account on the financial aid forms?</p>
<p>If you are renting out the house, then your parents are probably filing a Schedule E with their 1040 and claiming either a gain or loss on their income taxes. There are places on the FAFSA for income/loss from rentals.</p>
<p>For FAFSA purposes, the rental income/loss is part of the AGI. There is no separate listing. If they owe more than the home is worth, the value of the asset is 0 and is therefore not reported (you can’t use any amount less than 0 - that is, it can’t be used to reduce the value of total assets).</p>
<p>Profile is different - not sure what you might have to list separately.</p>
<p>You may well be asked for supporting documentation, but you should be able to provide that with no trouble.</p>
<p>You’re right kelsmom, it was the PROFILE Online that we broke down the various incomes separately.</p>
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<p>I believe you MUST list the rental property and list its value as $0. I don’t think you can just ignore the fact that you own it when completing these forms.</p>
<p>Maybe Profile asks about rental properties specifically - not sure. But FAFSA just asks for an asset amount, so the value of an underwater property does not come into play. Any questions regarding assets that are specific should always include numbers, even if the number is 0.</p>