Thursday, November 4, 2010

Second Home Guidelines

When someone buys a property, there are three possible types of occupancy: primary residence, second home, and investment property.

All three types of occupancy have different underwriting guidelines, and interest rates for primary residences and second homes are lower than they are for investment properties. Here are the Fannie Mae guidelines that determine whether a property is a second home:

-- The property must be located a reasonable distance away from the borrower's principal residence. Most lenders interpret this to mean 50 miles. If the second home is in an obvious vacation area (beach, ski resort, etc.) then the 50-mile limit does not apply.
-- The borrower must live in the property for some portion of the year.
-- The second home can only be a one-unit property.
-- It must be suitable for year-round occupancy.
-- The borrower must have exclusive control over the property.
-- The property must not be a rental or a timeshare.
-- The property cannot be subject to any agreements that give a management firm control over the occupancy of the property.

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