Mortgage Loans For Second Homes Lending Guidelines

This Article Is About Mortgage Loans For Second Homes Lending Guidelines

Second homes are becoming more popular than ever before. Many homeowners can now work remotely. Therefore, they can enjoy their time away from their main residence. Remote workers have the luxury of working away from their primary main residence. Many have the opportunity to purchase a second home near a tourist area or beach. Homeowners with primary residence in the north with cold winters can have the luxury to purchase a second home in Florida, Arizona, Hawaii, or warm-weather climates.

Mortgage Loans For Second Homes have certain mortgage underwriting guidelines. The main reason most second-home buyers want to make sure they go with second home versus investment home mortgages is because of the lower down payment requirements and mortgage interest rates. Down payment on second home financing is substantially lower than investment properties. Mortgage interest rates on second homes are similar to owner-occupant mortgage rates which are substantially lower than investment homes. Lenders classify second home financing as lower risk versus lending on investment homes.

There are various types of second homes available. Financing terms on second homes is different depending on the types of second homes.

Types Of Mortgages Available On Second Homes

Mortgages for second homes are generally conventional mortgage loans. Non-QM loans offer second home mortgages as well. Non-QM loans have lenient lending requirements. It is easier to qualify for non-QM loans on second homes versus conventional loans.

FHA, VA, USDA are for owner-occupant properties only. Mortgage rates are comparable as owner-occupied homes. Many of our clients have a primary residence in Illinois and purchase a second home in Florida. There are certain underwriting guidelines on mortgage loans for second homes.

In this blog, we will discuss Vacation And Second Home Lending Guidelines.

Types of Residential Mortgage Loans

There are two different types of non-owner-occupied residential mortgage loans. Second homes or vacation homes are the first types of non-owner-occupied residential mortgage loans. The second type of non-owner-occupied residential mortgage is an investment loan. Most second-home buyers cannot qualify to purchase their second home because of certain restrictions.

Underwriting Mortgage Loans for Second Homes

In order to qualify for mortgage loans for second homes, the deal has to make sense. The underwriter has to believe that it is really a second home and not an investment home. For example, if you own a primary residence in the city of Tampa, Florida and you want to purchase another home in the same city or same county, you would probably not qualify as a second home purchaser. If you were to purchase a second home that is waterfront or golf course frontage, that would justify a second home. If the second home purchase is like and similar home like it is to the primary residence, the mortgage underwriter will not let that fly.

Second Home Financing versus Investment Home Financing

If you are purchasing a second home, the home cannot be less than 100 miles from your primary residence. If your second home purchase is less than 100 miles from your primary residence, it will be considered an investment home and need to be underwritten as an investment home.

There are cases where homes less than 100 miles away from your primary residence can be classified as a second home mortgage but it needs to make sense such as being a waterfront home.

Minimum Down Payment on Second Homes

Fannie Mae and Freddie Mac financing on second homes requires a 10% down payment. Financing on investment homes require a minimum of 15% to 20% down payment Rates for investment homes are higher than rates on second homes

If you have any questions on second home financing, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.  Gustan Cho Associates are second home financing experts.  The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays. Please sign up for our daily mortgage newsletter at www.gustancho.com. The Team at Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, weekends, and holidays.