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Fannie Mae And Freddie Mac Second Home Financing Guidelines

Fannie Mae And Freddie Mac Second Home Financing Guidelines

This BLOG On Fannie Mae And Freddie Mac Second Home Financing Guidelines Was UPDATED On September 13th, 2018

Second home financing can only be financed through a conventional mortgage loan program. Government Loans (FHA, VA, USDA) are for owner occupant home financing only. Fannie Mae and Freddie Mac are the two mortgage giants that sets Second Home Financing Guidelines for Conventional Loans.

  • Second homes cannot be financed with FHA, USDA, or VA Home Loans
  • Second home financing guidelines state that second homes can only be financed through conventional
  • Second Home Buyers who do not meet Fannie Mae and/or Freddie Mac Guidelines can explore portfolio mortgage loans
  • Fannie Mae’s HomePath used to offers second home financing with a 10% down payment but HomePath Financing is no longer in existence

Down Payment Requirements

Under Fannie and Freddie Second Home Financing Guidelines, the minimum down payment required for second homes is a 10% down payment:

  • Second home financing is different than investment home financing
  • Investment home financing, the minimum down payment requirement is normally 20% to 25%
  • Single family homes require 15% down payment on investment property loans
  • With investment home financing, potential rental income can be used to qualify for the borrower’s income
  • Investment home mortgage rates are about 0.50% higher than primary and second home financing mortgage rates
  • Second home financing mortgage rates are almost the same as primary home mortgage rates
  • Second home financing mortgage rates might be 0.125% or 0.25% higher than owner occupied primary homes mortgage rates

Credit Requirements On Second Homes

The Gustan Cho Team at Loan Cabin Inc. has two types of second home financing:

  1. Conventional Loans
  2. Portfolio Loans

The Gustan Cho Team at Loan Cabin Inc. is a national direct lender with no mortgage overlays on government and conventional loans. We just go off Fannie Mae and/or Freddie Mac Automated Underwriting System Approval. NO OVERLAYS.

Second Home Borrowers need to qualify for Conventional Loans:

  • 620 credit scores
  • Debt To Income Ratio up to 50%

Types Of Properties

Any property one to four units will qualify for conventional second home financing.

The following properties are common second homes:

  • Single Family Homes
  • Town Homes
  • Condominiums
  • Two To Four Units
  • Non-Warrantable Condos
  • Condotel Units

Condotels and Non-Warrantable Condominiums need portfolio loan program. Fannie Mae and Freddie Mac does not allow non-warrantable condos and condotel financing.

Qualifications To Be Classified As Second Home

Home Buyers planning on purchasing a second home, there are certain qualification requirements in order to classify it as a second home versus investment home.

  • Being classified as an investment home will require more money down
  • Mortgage rates on investment home financing is much higher than it would be a second home financing
  • There are strict mortgage lending guidelines for it to be classified as a second home

Distance Between Primary And Second Home

First, the second home needs to make sense.

  • Lets take a case scenario on how mortgage underwriters view second versus investment homes:
    • Homeowners who live in a 2,000 square feet home in Tampa, Florida
    • Homeowner wants to purchase a 2,000 square feet home in Clearwater, Florida
    • Distance from primary Tampa home to Clearwater is only 15 miles away
    • Mortgage underwriter will not buy that
    • Underwriter will underwrite the Clearwater, Florida mortgage loan application as an investment home
    • This will require a 20% down payment
    • Mortgage rates which are 0.50% to 1.00% or more higher than it would be for a second home mortgage loan
  • However, if the Clearwater, Florida home were in a resort location such as ocean front or in a golf course community, it can possibly be considered a second home
  • Even though it is only 15 miles away from owner occupied primary residence in Tampa, Florida
  • A good example of second home financing would be if second home purchase was in Miami, Florida, which is hours away from Tampa, Florida
  • Then it can be classified as a second home
  • Out of state home purchases can always be classified as second home financing due to the distance

Qualifying For Second Home Mortgages With Direct Lender With No Overlays

Second Home Buyers who need to qualify for second home financing with a direct mortgage lender with no lender overlays can contact us at The Gustan Cho Team at Loan Cabin at 262-716-8151 or email us at gcho@loancabin.com.

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