How To Finance A Owner Occupied Second Home Purchase

How To Finance A Owner Occupied Second Home Purchase

This BLOG On How To Finance A Owner Occupied Second Home Purchase Was UPDATED On September 23rd, 2018

Homeowners upgrading to a new home home can be facing challenges trying to sell their new home and buying a new home simultaneously. Lenders will often will need to qualify both current mortgage payments and the new proposed mortgage payments when calculating the borrowers debt to income ratios. There are issues too when home buyers move from a similar property to another similar property.

  • Many homeowners decide to do a second home purchase
  • 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
  • This is done 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, here is a case scenario:
    • a current homeowner moving from a current 2,000 square ft. home to another 2,000 square ft. home that is only ten miles away
    • the mortgage underwriter might question why they would be moving to a similar like home so close to a 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 they are moving from a 2,000 square ft. home to a 4,000 square ft. home, the move makes sense
  • A mortgage underwriter might not question the second home purchase since they 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 100 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
  • 20% down payment is required on investment homes
  • If the second home purchase is waterfront or in a resort area and is less than 100 miles away from the primary residence, the second home purchase can definitely be classified as a second home or vacation home
  • 10% down payment will be allowed

Second Home Purchase As A FHA Insured Mortgage Loan

The only way to be able to have two FHA Loans is to have a job transfer that is at least 100 miles from the first home. The homeowner needs to have an job offer letter letter.

If home buyers currently have a home with a FHA loan and 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 and the owner needs to have a job offer letter where they intend on purchasing the second home.

  • Again, the deal needs to make sense
  • For example, if home buyers had a job transfer and it is over 100 plus miles away
  • They decide to purchase a home near their work
  • Home buyers can definitely qualify for an owner occupied second FHA loan
  • This holds true even if they have a current FHA loan
  • They need a job transfer that is 100 miles or more with selling their existing home to qualify for two FHA Loans at the same time
  • Home buyers who are relying on a FHA loan for a second home purchase as their primary residence and currently have a FHA loan, make sure to check with a lender
  • Check to see if their particular scenario will qualify for you to get a second FHA Loan

The Gustan Cho Team at Loan Cabin Inc. has no lender overlays on financing two FHA Loans if home buyers has job transfers 100 miles with job offer letters.

Related> Second Home Financing

Related> 2014 Update On Second Home Financing

Related> Financing A Second Home

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