Second Home Mortgage Loans Fannie Mae Lending Guidelines

This article covers Second Home Mortgage Loans Fannie Mae Lending Guidelines

Second home mortgage loans have specific mortgage lending guidelines. Government Loans are for owner occupant properties only. Fannie Mae and Freddie Mac allow second home loans and investment home financing on conventional loans. Mortgage rates on second homes are similar to primary owner occupant homes. However, mortgage rates on investment homes are substantially higher than primary and second homes. Second homes only require a 10% down payment. Down payment requirements on investment homes is normally 20% or more depending on the type of property.

Fannie Mae and Freddie Mac Guidelines on second home mortgage loans have specific lending requirements on second home financing. Second home mortgage loans are all conventional loan programs. Gustan Cho Associates offers second home mortgage loans via non-QM loans and bank statement loans. Government loans (FHA, VA, USDA) are for owner occupant homes only. To qualify for second home mortgage loans, borrowers need to qualify for minimum conventional lending guidelines.

620 score is the minimum credit score required to qualify for conventional loans. However, a 620 credit score is considered a very low credit score for conventional loans. Borrowers with 620 credit score, the chances are that they will get hit with paying a high mortgage rate. For the best possible mortgage rate on a conventional mortgage rate, borrowers should have a 740 plus credit score. For example, today’s mortgage rate for a mortgage loan borrower with a 620 credit score for a conventional loan, the mortgage rates will be very high plus discount points may be required. Borrowers with 740 credit scores will get the best mortgage rates on second home mortgage loans.

Second Home Mortgage Loans: Distance From Primary Home

For a home to be classified as a second home, it needs to be some distance away from the borrower’s primary residence. At least 60 or more miles. For second homes that are closer than 60 miles from borrower’s primary residence, the second home needs to serve a purpose. Why is it a second home? The second home purchase needs to make sense.

Is it classified as a second home because of the following:

  • being a waterfront property
  • resort area like being near Disney World
  • golf course property
  • other unique out of the ordinary features

10% minimum down payment is required for a second home purchase. Mortgage Rates on second homes are similar to primary homes.

Debt To Income Ratios Calculations For Second Homes

Debt To Income Ratios Calculations For Second Homes

Both the primary residence and second home mortgage payments are calculated when qualifying for the borrower’s debt to income ratios. If the second home is rented part of the year or is part of the homeowners association rental program, that rental income cannot be used towards income to offset the second home housing expenses. There are many times where the buyer cannot qualify for a second home due to higher debt to income ratios. One option to overcome that is to purchase the second home as an investment home. If the home buyer can put a 25% down payment on a home purchase and goes for an investment property mortgage loan, then the borrower can use 75% of the potential market rental income towards the calculation of his or her debt to income qualification. This is even though they have no lease and they are not planning on renting the second home.

The appraiser will decide what the market rent will be and 75% of the market rent. The figure the appraiser comes up with market rent will be used towards income for the borrower. Home Buyers who need to qualify for a mortgage with a lender with no overlays on government and conventional loans can contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] We have zero mortgage lender overlays on FHA, VA, USDA, Conventional Loans. We are also correspondent lenders on non-QM loans and bank statement loans for self-employed borrowers

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