Classification Of Second Home Purchase
Many homeowners decide to do a second home purchase and once they close and move in to their second home, they decide to sell their current home. However, the most advantageous way to purchase the second home is to apply for a mortgage loan as an owner occupied home to take advantage of the low down payment and lower interest rate than a second home, vacation home, or investment home mortgage loan.
Second Home Purchase Needs To Make Sense To Be Considered Owner Occupied
If you are currently a homeowner and want to purchase another home and want an owner occupied mortgage loan, the deal needs to make sense. For example, if you are moving from a 2,000 square ft. home to another 2,000 square ft. home that is only ten miles away, the mortgage underwriter might question why you would be moving to a similar and like home so close to your current primary residence. They might consider the second home purchase as an investment home where a minimum down payment of 20% is required. However, if you are moving from a 2,000 square ft. home to a 4,000 square ft. home, the move makes sense and a mortgage underwriter might not question the second home purchase since you are upgrading.
Classifying It As A Second Home Purchase
Some homeowners decide to move to a similar and like home and do not mind the mortgage underwriter considering it as a second home. With second home purchase financing, a minimum of a 10% down payment is required. However, the deal has to make sense. How far is your second home from your current residence? If it is less than 60 miles away, the mortgage underwriter might question it and classifying it as a second home purchase will not fly. The mortgage underwriter might classify it as an investment home where a 20% down payment is required. If the second home purchase is waterfront or in a resort area and is less than 60 miles away from the primary residence, the second home purchase can definitely be classified as a second home or vacation home and the 10% down payment will be allowed.
Second Home Purchase As A FHA Insured Mortgage Loan
If you currently have a home with a FHA loan and you decide to do a second home purchase via FHA loan, that is allowed as long as the second home purchase can be classified as an owner occupied home. Again, the deal needs to make sense. For example, if you had a job transfer and it is over 60 plus miles away and you decide to purchase a home near your work, you can definitely qualify for an owner occupied FHA loan even if you have a current FHA loan on your existing home. If you are relying on a FHA insured mortgage loan for your second home purchase and currently have a FHA loan, make sure you check with a mortgage lender to see if your particular scenario will qualify for you to get a FHA insured mortgage loan.