Is it a Primary Residence, a Second Home or Investment Property?

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Every so often, someone will be interested in financing for a home they will not be living in 100% of the time…they want the best rate which is “owner occupied”.   It’s crucial to know the difference in your lenders eyes and to be completely upfront so you avoid committing fraud.  Bottom line, the property and situation needs to make sense to the underwriter.   Here are some basic definitions:

Principal/Primary Residence.   When a property is classified as “owner occupied” it receives a better interest rate than an investment property.   It’s very straight forward:

  • The owner lives in the property for a majority of the year.
  • The property is in a location that make sense in relation to their employment and contains characteristics that suits the needs of their immediate family.
  • The borrower acknowledges (on several loan documents) they intend to occupy the property.   Note: “intend” does not mean, “oops…I financed this believing I would live here and now I’ve decided to buy another property near by that I’ll occupy”.   Typically the lender wants the buyer to occupy the property within 30 days of closing.

Second Home.  A second or vacation home must be a reasonable distance away from a principal residence.  Typically lenders like to see a minimum of 50 miles for distance from the borrowers home.  The owner must occupy the property for some portion of the year and the property must be suitable for year round occupancy. Second home definitions can vary from lender to lender.  Some will insist that a second home be in a resort area.  It’s generally a little tougher to qualify for a second home–borrowers are often qualifying with mortgage payments on two properties: their primary and the proposed second mortgage.

Investment Property.  This is a property that the borrower does not occupy.  It can also be a “second home” or vacation home that is too close to a primary residence or that the underwriter does feel strong enough that it is indeed a vacation home.  As there is a higher risk to banks with investment properties, the interest rate reflects the risk (the higher the loan-to-value, the higher the rate).

Recently, I was working with a woman who currently owns a one bedroom/one bathroom condo.  A larger two bedroom unit became available and she decided she wanted to purchase that and to rent out her one bedroom.   Where this could be potentially classified as an “investment property” since the units are obviously closer than 50 miles to each other, it makes sense to the underwriter that she is moving to a larger unit.   As long as the buyer moves into the two bedroom within 30 days of closing, she qualifies for owner occupied on her two bedroom.  If she were to refinance her one bedroom, it would be considered “non-owner occupied”.

Another common scenario is if a parent is helping their adult child (or other family member) buy a home.  If that home is located too closely to the parents home and they are buying it without their child being a co-signer, it may also be treated as an investment property.  However if the property is for housing the child while in college or if the child is disabled, the borrower may qualify for an “owner occupied mortgage” rate with the Family Opportunity Mortgage.    The Family Opportunity Mortgage does make exceptions with occupancy for family members who are buying homes for:

  • Elderly Parents
  • College-bound Child
  • Disabled Adult Child

Lenders will do post closing investigations to make sure that borrowers are actually residing in the property.  If they find that the borrower is not, they may call the Note (mortgage) due…and that may be just the beginning of that person’s troubles.    Mortgage fraud is a very serious issue and falsely stating that one intends to occupy a property tops the list.   Knowingly providing false information on a loan application is a federal crime.

From Fannie Mae and Freddie Mac’s Uniform Deed of Trust:

Borrower shall occupy, establish, and use the Property as Borrower’s principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower’s principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond Borrower’s control….

Borrower shall be in default if, during the Loan application process, Borrower or any persons or entities acting at the direction of Borrower or with Borrower’s knowledge or consent gave materially false, misleading, or inaccurate information or statements to Lender (or failed to provide Lender with material information) in connection with the Loan.  Material representations include, but are not limited to, representations concerning Borrower’s occupancy of the Property as Borrower’s principal residence.

In defense of most borrowers, sometimes it may seem unclear as to what type of occupancy a property qualifies for. Borrowers simply need to be upfront with their Loan Originator with the use and intentions of the property to make sure they do not commit mortgage fraud, even if it is not intentional.

If you would like a rate quote for your owner occupied, second home or investment property located any where in Washington, click here.

Comments

  1. This isn’t quite what you’re talking about here, but I have a question about mortgages. If you want to buy a house (by yourself) and have a couple of roommates to lower expenses, can you still only get the same mortgage as you would qualify for on your own, or will the bank look at the fact that you will be receiving rental income from roommates and finance you for a higher loan? (I have heard of this with owner-occupied multifamily units, but haven’t been able to find anything on single family homes.)

    Thanks!

  2. Hi Annie, conforming loans will not factor room rents as income for qualifying. They need to be on the mortgage with you in order to use their income.

  3. Hi Rhonda,

    I’d recently purchased a secondary home in another state. However, since I am not there most of the time can I let my family member(Brother) live in it for free?

    Thanks in advance.

  4. Joe, you can let your brother live in the home rent free…it’s totally your call. The issues are when you go to buy another home or refinance the home in the other state, how will the underwriter view the two homes?

  5. Rhonda, is there a total length of time necessary to stay in the house in order to satisfy the requirements for a primary residence? A house I’d like to buy is just over the state line. My current home is totally paid off. I’d like to buy, move into and fix up the new house for a few months and rent out my old house. I’ll then sell the “new” house and move back into my old house. In your opinion, would I qualify for “primary residence” mortgage rates on the house I’d like to buy?
    Thanks
    Jade

  6. Jade, the Deed of Trust states that you will live in the property for at least 12 months…however, if your intent is to buy it AS IN INVESTMENT to resale, then this would be an investment property.

  7. Jonathan Erwin says:

    I am in the process of selling my current home and purchasing another about 15 miles away (closer to work). The purchase of my new home is contingent on the sale of current. I received a call from someone interested in a lease-purchase deal; which I would be amenable to doing. I contacted my “new” mortgage company to see if they were ok with the idea of leasing my old home with the appropriate forms, etc.. They responded that it would be ok as long as the new home was 100+ miles from my current home. Have you ever heard of this? Is it some type of industry standard? Why would someone want a rental that was 100+ miles away?

  8. Jonathan, normally they want it to be 50 miles away from your home (at least, that’s what we’ve always used in the Seattle area). 15 miles is too close.

    The underwriter typically has the final say.

  9. I am separating from my husband, but not divorcing. I am looking into buying a duplex and living in half. Could both of our homes be considered “owner occupied”? What percentage would I need for downpayment?

  10. Mary, do read this post on divorce (I know you’re separating and not divorcing) http://budurl.com/divorce

    On a side note, you more than likely will have to qualify with both mortgage payments and joint debts.

    Your required down payment will depend on your credit scores.

    FHA can be a great way to purchase a duplex where you will occupy the property. You can do minimum down payment (3-3.5%) and have owner occupied rates. If your existing home has an FHA insured mortgage, this will not work (FHA limits one active FHA mortgage per person at a time–you could not be on two FHA mortgages).

    I strongly recommend that you contact an attorney (if you haven’t done so all ready) who specializes in divorce/separation.

    Should your spouse ever be late on the mortgage (if your name remains on that debt) it will count as a mortgage late against you regardless of what any separation agreement or divorce decree or even if you’ve recorded a deed to remove your name from the property (your name is still on the debt).

  11. I do not pay rent and live for free in Pennsylvania in a duplex apartment owned by my mother. I am buying a condo at the New Jersey shore as a vacation home for myself. I will not be renting it out ever and I have no other mortgage in my name. Would this vacation condo qualify as a primary residence for mortgage purposes?

  12. Hi Arlene, it will ultimately be up to the underwriter/lender. They will want to know that you are residing in the property for a portion of the year.

  13. Hi Rhonda,

    My wife and I wish to purchase our first home. We currently live and work overseas so we would not be able to occupy the home within 30 days and for a duration of 12 months. Since we do not own a primary residence, would a purchase of a home in the Tennessee qualify as a vacation/investment property since we cannot meet the occupancy criteria. Are there still tax benefits in purchasing our first home, not occupying it, and renting it out until we do occupy it. It would probably be 5 years or more before we would occupy it.

  14. Eric, if you’re renting out the home, odds are it’s a rental.

  15. Brad Weir says:

    Hi Rhonda,
    My primary residence is in Maryland. In 2004 I purchased a home in North Carolina for my father-in-law to live in (he was unable to manage living space on his income after his wife’s death). He currently pays me $300/mo rent, well below market value. Several questions. (1) Can I treat this as a 2nd home and deduct interest/taxes (I have not been deducting depreciation). (2) The $300/mo for the past 5 years almost squares us in terms of money I haven loaned to him over the years. Do I need to start recording that as rental income? (3) Because he’s an elderly parent (72, disabled veteran) are there any programs that allow me to refinance at today’s low rates as if this were an owner-occupied residence? Thanks.

  16. Brad, regarding items (1) and (2), please check with a CPA in your area.

    There is little known program that is called the “Family Opportunity Mortgage” that might work in your case. Contact a representative from Chase Mortgage or a local mortgage broker (it’s a Chase product–if they still have it).

  17. Dear Rhonda,

    I currently live as a renter in San Francisco. I also work full-time in San Francisco as a Legal Assistant and freelance as an Independent Translator, the nature of which being that I can work from anywhere.
    I do not own any property and am planning on buying my first home in New Orleans, where I have been spending several days every month or so and am planning on living in the near future. I am looking into buying a double, renting out one half and keeping the other half for myself. I was told that by doing so this property would be considered an investment property as it would not qualify as my primary residence and that subsequently I would have to put 20% down. Since I do not own any property anywhere yet and my second job allows me to virtually live and work anywhere I decide, I disagree with this and would appreciate your opinion. Thank you so much in advance!

  18. Hi Rhonda,

    My husband and I are thinking of purchasing a home for my sister in our home town to live in. Our home town is 75 miles away from where we currently reside, our plans were to purchase the property as an investment property and have my sister pay the cost of the mortgage on the home and nothing extra until she is able to secure a loan on her own in which at that time we will sell the home to her. We spoke with a lender and was informed that the down payment for investment properties is 15%; thus the lender suggested that we purchase the home as a second home since we are 50 miles away, in which we would only need to put 5% down. Is this possible/allowable to purchase the home as a second property? And what is the pros and cons of an investment property over a second home? Thanks!

  19. Hi Sabine,
    It will ultimately be up to the underwriter/lender as to how they view this. They consider your employment and will want you to occupy the property for “a majority of the year”.

    What will you be doing with your home/duplex (the non-rented part) when you’re not their? Will you still be working in San Francisco as well?

    An investment property will require 20% down payment (there is no private mortgage insurance for investment properties at this time).

  20. Shawn, I know you didn’t ask me this…but is it possible for you to buy with your sister as a co-signer? I’m not sure where your lender is finding non-owner financing with 15% down (private mortgage insurance is not available for investment) unless it’s “hard money” or private?

  21. Hi Rhonda.
    We owe an investment property at a higher interest rate and within 10 miles of our primary residence. We want to refinance it for a lower rate and add my in laws to the title. This will be their primary residence and my father in law is disabled. Does this qualify under the family opportunity mortgage? Can we add them to the mortgage? What is the best way to get a good rate?

    Thanks in advance,
    Terese

  22. Terese, as long as your parents are indeed living there, then the transaction may qualify for the opportunity mortgage.

  23. Hi Rhonda,
    My husband and are I currently own and live in a condo. We are planning to buy another home (within 50 miles from the condo), which we will indicate on the loan that it will be our primary residence. After purchasing the new primary residence, what will the condo be considered? Investment property? Second home?
    Also, does the property status (ie. primary, investment, second) change as soon as I indicate a new primary residence?
    Thanks in advance,
    Emily

  24. Emily,
    what do you mean by “indicate” are you going to live in the new home or not? If you’re not living in the new home, it doesn’t matter what you “indicate”. What matters is what you actually do.

  25. We plan on living in the new home. What would the status then be for our condo?

  26. Emily, if you’re living in your new condo within 60 days of signing the mortgage/deed of trust; then it would be owner occupied.

    What are you planning on doing with the other condo? Within 50 miles of your new residence, lenders will view the other condo as investment property.

  27. rhartge@goucher.edu says:

    I live in Maryland. 4 years ago my mother put my brothers name and mine on her home. She removed her name from the property.She passed away in December. My brother and I are the selling the property for 215K. We both have primary residences. Do we have to pay capital gains tax when we sell the home?

  28. rhartge@gourcher.edu, your question would be better suited for a CPA or your tax professional. I specialize in mortgage.

  29. Rhonda,
    Me and my wife are planning to buy a home that’s about 10 miles from our current home which we own and has mortgage. This home we want to buy needs lot of fixes and also we want to remove the Underground oil tank, this can cost tens of thousands if there is oilleak. However, from Department of Environmental Protection agency we can qualify for UST fund (http://www.nj.gov/dep/srp/finance/ustfund/ustfund_unreg_fs.pdf) to do this work. One of the requirement for this, property should be primary residence in addition to others which we qualify. Should we move into this and rent out the current house (slightly better) and make “to be purchased” as primary? This house which we want to buy can also be used for office if we want to as it’s on the corner of a busy street. Currently this house is zoned as residential by the city zoning authority.

    How should we handle this with out committing fraud?

    Essentially to minimize the risk associated with the cost of removing Oil tank, we have to make this to be purchased property as primary even though we prefer the current home to be our primary residence.

    Thanks

  30. abc123, you need to review this with the lender who will be providing this loan. What are your plans after the fixing up is done?

    My opinion is that you’re going to have a tough time convincing anyone this purchase is owner occupied because of distance and type of property.

  31. Hi Rhonda, I’m in a similar situation to Emily. Will I have to refinance the current place as an investment property when I apply for the mortgage for the new home, which will be the primary residence? Or, can i leave the current mortgage as is?

  32. Jeff, it will be up to the lender with your new home. They probably won’t make you refinance your current place, but they might treat your new home as an investment. It depends on whether or not your new home passes the “smell test”. Have an honest conversation with your mortgage professional.

  33. Rhonda, my wife and I lived in the north suburbs of Chicago before relocating to southern Calif two-and-half years ago and currently rent. We never sold our Chicago home and now have it rented. There is a strong possibility we may be moving to the Dallas area and wish to buy in Dallas. Will the lenders allow us to finance another home since we still own a home in another state? We will have no difficulties qualifying.
    Thank you.

  34. My wife and I bought our home in 2000 and lived in it up until this past fall. I was layed off and finally found another job 95 miles away in Los Angeles. Due to traffic the 3 hour drive was out of the question. We decided to rent our house out and move to LA and rent ourselves. We were very lucky to get renters in paying our mortgage, however our home has since declined another 20% and I am sure our renters will move out in a few months for $300+ cheaper a month. Question is, since we only own one home that we had lived in for 7+ years can we refinance as a primary residence? If we don’t have renters we would have to move back in right away. We are on a month-month lease in LA so we can move out freely.

  35. Derek, even if you moved back into your home, the underwriter/lender could question your commute and not believe the property is owner occupied. In addition, you would need to remain in your home for a year (according to the Deed of Trust).

    Everyone is on “fraud alert” these days because of the record levels of mortgage fraud (including occupancy fraud) that has taken place.

    Why give yourself that type of commute, lose your renter (who you haven’t lost yet), deal with the expense and inconvenience of moving…just to possibly save a little on your rate. What is the current rate on your home and loan to value?

  36. Hi Doug, having a home located in another State should not disqualify you from buying another home.

  37. Hi Rhonda,
    My partner and I currently live in San Francisco but would very much like to move to Southern California where we have friends and family.

    He is currently unemployed. Although our rent here in SF is very expensive (~3K/month) I make enough money that I could carry both the apartment here and the mortgage on a home in Southern California.

    We would like to purchase a home in Southern California with the intention of occupying more or less immediately. My partner would move in full time and begin his job hunt. I would live there part time and move in full time only when I’d secured employment in Southern California.

    Would our mortgage qualify as “owner occupied”? Any issues with the fact that the only qualifying income comes from a job I intend to leave (only after securing similar employment in SoCal)?

  38. Jim, without employment secured before you make your move, an undewriter may not buy “owner occupied”…it’s possible that second home might work but again, it’s up to your lender.

  39. chet_h@email.com says:

    Hi Rhonda, im getting a investment property and hopeing to flip it for the first time, but if i cant flip i might end up moving in to it and renting out my old house, how can i change my investment property to my primary res. and my primary to my investment property later on……

  40. Hi Rhonda,

    I am buying a home in Florida while I live/work in London, England. I am told by my lender I am eligible for a primary residence mortgage as I do not own any property and am currently renting. I am putting slightly over 20% down. I will be staying at the property on weekends at least several times a year and my immediate family lives nearby and will be staying there about once a week. Should I be concerned about a primary residence mortgage?

  41. Marty, is possible that your lender is viewing it as a second home which would be similar to owner occupied.

  42. It sounds like you’re playing the “hat game” like they have during at the M’s game! Your investment purchase should be investment financing; if you’re not able to “flip it”…the only way to get an owner occupied rate would be to refi however…it’s up to the lender if they believe you’re going to retain the property or if you’re intent is flipping. Besides refinancing has a cost to it and investment rates aren’t too bad right now with the historic low rates (I post rates every Friday at Mortgage Porter).

  43. Ginger Hughes says:

    We want to buy a home for our son (as co-signers but the home would be in his name) to take advantage of the low interest rates and first time home buyer credit. Apparently this is allowed by the IRS. Our son is in college and would only be living in the home over the summers until he graduates and then it would be his primary residence. He is still considered a permanent resident (votes here) of this area but goes to school 3-4 hours away. We were wondering if this can be his primary residence even if we would rent it to friends of his during the school year. Would we be breaking rules regarding primary residence? He has never owned anything else and it will be his long term residence.

  44. Ginger, you should find a lender in your State who can offer you The Family Opportunity Mortgage (linked above in the post)–this will provide you with owner occupied rates and is designed for your situation (kids in college). You can also consider a FHA mortgage which allows co-signers (some refer to this as the FHA Kiddie Condo Program).

  45. My husband and I currently own a house, the deed is under our names, but the loan is on his name. I am thinking buying another house close to my house for my parents, so we can take care of them when they are getting older. Can I claim this as my residence home with the lender so we can get lower rate?
    Thanks,
    QVu

  46. QVu, unless YOU are occupying the property for at least a year, its NOT owner occupied in the lenders eyes. Some lenders may have the Family Opportunity Mortgage which is a Fannie Mae program that would allow you to have owner occupied rates without committing fraud. Please send me an email for more information if you’re interested.

  47. Rhonda,

    My wife has a home in another state, which she owns. We are currently renting, but we are looking at moving back to where her home is. But before we move in, we would like to add a second story to the house, and we plan to refinance the current mortgages on the house while adding the cost (or some of the cost) of the second story to the mortgage. Because of the work to add a second story, we likely couldn’t move in within 60 days, but nor could anyone else for that matter. We would move into it as soon as the construction work was complete. Could we refinance as our primary residence?

  48. Rob, it sounds like you’re going to require a construction loan which is an entirely different animal. Disclose everything you’ve mentioned with your mortgage professional and they’ll guide you through this.

  49. groovydan@hotmail.com says:

    Rhonda, I currently live rent free in Santa Barbara, CA (I manage a condo owned by my grandmother). I am looking to buy a property in Palm Springs area this summer. Can I qualify for primary residence if I commute 200 miles on Monday morning, stay in SB Monday/Tuesday night, go home to Palm Springs Wednesdays, then return for Thursday night, and go home on weekends ?? I have full time employment for tech company in SB.

    Essentially I would be staying in SB on Mon, Tues, Thurs nights, and in Palm Springs (at home) Wed, Fri, Sat, Sun.

    I am used to driving long distances, I go up to SF bay area (400 miles each way) every couple weeks currently.

    PS – I will not be renting the property!
    Thanks, Dan

  50. groovydan@hotmail.com says:

    Hi Rhonda, after speaking with a loan officer, I think we’ve worked it out! Thanks anyway.
    Dan

  51. Groovydan, I’m glad you worked it out…often times in scenarios like thisy, your best off asking your mortgage originator. What did they tell you?

  52. dlamdc@gmail.com says:

    I have the same situation as groovydan, except I rent a small apt for weekdays near work and commute to my condo on weekends. My bank, however, denied my loan claiming that my rental apt is my primary residence, not the condo which I tried to refi.

    Wish all banks are consistent.

  53. Dan, it’s really a case by case basis with lenders. You might want to try your luck with another one. Do you rent your home out during the week?

  54. savaliat@gmail.com says:

    Hi rhonda,
    I have been living with my cousin at his home. 2 years ago, i bought a house 25 miles away closer to my work place. Now, during weekdays i live at the new house and during weekends i go back to my cousins place. I have still kept my cousin’s place as my address everywere. Now when i am trying to refinance the new house, underwriter says that it can be only treated as investment property because new house is not in a vacation type of area to be considered as vacation home and it can not be treated as primary home because all my documents show my cousin’s address on it.
    They want me to write a letter to them explaining why all my documents has my cousin’s address and how can this new home be my primary residence ?
    WHAT SHOULD I DO? HOW CAN I RESPOND TO THEM? PLEASE HELP !!!!

  55. The property is too close (25 miles instead of 50 as I mentioned as a guideline in the post). And it’s totally the underwriters call on whether or not they’ll accept the property as vacation. I once had an underwriter (much to my surprise) refuse to consider a property as a second home/vacation even though they were in different States! This lender has the only program that was going to work for my client so they paid the higher (non-owner occupied) rate.

    Is there any way to prove that you actually live in the home on weekdays?

  56. Are there any Mortgages that are lest then 10% down on Secondary Homes?…e.g. vacation home.

  57. Jeunesse says:

    Hi Rhonda! My husband is in the military and the nature of his job makes it impossible to settle in just one state although his next station would be for a longer duration. We’re currently renting out an apartment in So.Cal and have never owned a house… Just recently, we saw a beautiful home in NV and since he could get stationed there next year, he wanted to purchase this house before this year ends because he will get a bonus. Will the house in NV qualify for a primary residence even if we couldn’t live there for another 10 months or so? Or is it a second home because we are still living in a rented apartment. Please advise, thanks.

  58. Jeunesse, Are you considering a VA mortgage? Here are the guidelines for owner occupied (you should discuss this with your mortgage originator):

    Occupancy within a “reasonable time” means within 60 days after the loan closing. More than 60 days may be considered reasonable if both of the following conditions are met:

    • the veteran certifies that he or she will personally occupy the property as his or her home at a specific date after loan closing, and
    • there is a particular future event that will make it possible for the veteran to personally occupy the property as his or her home on a specific future date.

    Occupancy at a date beyond 12 months after loan closing generally cannot be considered reasonable by VA

  59. I should add this to my VA owner occupied answer above:

    Occupancy (or intention to occupy) by the spouse satisfies the occupancy requirement for a veteran who is on active duty and cannot personally occupy the dwelling within a reasonable time.

    Occupancy by the spouse may satisfy the requirement if the veteran cannot personally occupy the dwelling within a reasonable time due to distant employment other than military service. In these specific cases, consult your Regional Loan Center (RLC) to determine if this type of occupancy meets VA requirements.

  60. Rhonda,
    To qualify for the First Time Home Buyer 8K stimulus one must not have lived in their primary residence for 3 years. We left our home on August 7th 2006 to work and live in a new state, we drove so it took 3 days to get to the new state and sign our lease on August 10th, and our new tenant took occupancy of our home on August 12th. What would the IRS 3 anniversary date be so we may close on a new primary residence in August?

    Thank you
    Bob

  61. Bob, that’s a better question for your CPA.

  62. Hi Rhonda,

    My wife and I would like to buy a condo in a newly renovated two-unit building, however, if the other unit is not owner-occupied our mortgage won’t be approved. Since it was just finished in the last week, right now no one is living in the other unit, but the listing agent said that the son of the unit’s owner would be moving in. Two questions:

    1) If the son is living there will our lender consider that owner occupied?

    2) In a situation where the sale of a 2nd unit (to an owner who will occupy) is in process but hasn’t closed, how will our lender view this as it relates to occupancy status?

    Thanks

  63. When buying a second property that is in a resort area and more than 50 miles away from my primary residence, does it qualify as a Second Home if I will be using it for a few weeks out of the year but rent it out when I am not there?

  64. Fred, you need to ask your lender these questions.

  65. Irv, I strongly recommend that you review this scenario with your mortgage originator.

  66. Hi Rhonda -
    I’m selling a condo in Boston. I’ve heard and read conflicting reports re: whether a prospective buyer who wants to buy a condo as a primary residence will be unable to secure a mortgage if fewer than 51% of the other units in the building are owner-occupied. Does that rule apply only to properties being purchased for investment purposes? Also, are condos that are not rented out (e.g., where family stays when visiting, where the owner stays one night/week, which is being foreclosed)considered “owner-occupied.” Finally, does this rule vary from bank to bank, state to state? thank you so much for your help

  67. Mary, I don’t lend out of the State of Washington so I can’t really comment for property located outside of Washington. Some banks may have different guidelines–and there may be “alternative financing” available or seller financing could be an option.

    Conventinal lenders are looking for 51% owner occupancy.

  68. I am married, but I am not on the title of my husband’s house, and we don’t live in a community property state. I want to buy the house next door to live in — we have four kids and only three bedrooms, and I want to take two of the kids and move next door with them. Since I am not on the title of my husband’s property, is there any chance I can get an FHA loan, or are they going to say that because I already live someplace, even if I do not own the place I live, I can’t treat the house next to where I live as a primary residence?

  69. Whitney says:

    Rhonda,
    I am currently engaged to my fiance and I am considering buying a house to live in (I live with my parents). If things progress with my fiance I may move in with him and rent the house I am considering buying. Can I claim that as my primary, since if things don’t work out it will be my primary residence for a while. Thank you.

  70. AlaraJRogers, I would say odds are against you financing the home as owner occupied. It would have to make sense to the underwriter/lender.

  71. Whitney, a lot boils down to your intentions with the home and when you rent it. If you buy it now and rent it out a few months later, it may really look like you intended to treat the home as an investment.

  72. Jennifer says:

    Hi Rhonda,

    I am living in New York as a renter, but am originally from Austin, TX. I am ready to move back home and want to buy a house there and have not owned previously. Ideally, I’d like to start looking for a house there now and hopefully close on something Nov/Dec and move back then. Obviously, I don’t have a job in Austin because I am not living there but will easily get a job when I move back (I work in health care). I’d prefer to buy the house, move back and then get a job there. Should there be any issue about the house being my principal residence if I am living and working out of state at the time that I am buying? I will be able to occupy it within 30-60 days after closing. I don’t want to take a job in Texas before I buy the house and have to figure out where to live while I look for a house. Thank you so much!

  73. Jennifer, as long as your underwriter/lender is okay with it…it should be fine. However, the bigger issue you may face is not having employment lined up before you make your move…unless you can qualify for the new mortgage without the income from the new job. Most lenders will at least require a paystub prior to closing and/or an employment letter (assuming you’re not self employed).

    Good luck!

  74. Hi Rhonda,
    My wife & I (I’m 24) are looking at buying our first house in the same area where both our parents live (in CA). We’ve never owned a house, & currently rent an apartment in a different state where I go to school. We would consider the CA house our primary residence & plan to live there after I graduate. Until then, we could only stay there a few months out of the year (when we come home during breaks), but we would move all our extra property out of our parents’ garages into this new house (we don’t bring much with us during the semester), start decorating it, & use this new address on all our documents. Before now, my wife & I have considered my mom’s home our primary residence, but we don’t live there & want a place of our own during summer & winter breaks. What would lenders & the IRS consider this CA property? Would we still be able to qualify for the $8000 first time homebuyer tax refund? It would probably make the difference between buying and not buying. Thanks for your insight!!

  75. Hello Rhonda,

    My husband and I live in PA and we are considering buying a second home in Florida that we may move to permanently in about 5 to 7 years for “retirement”. We are doing this now because of the low real estate market in that area. There is a chance we could rent this home for part of the year. What are the rules regarding rentals/owner occupancy of second homes? This is foreign territory to us as we have never owned more than one house at a time! We appreciate any advice you can give…

  76. Robert, you need to check with your lender. What are you planning to do with the property when you’re not living in it?

  77. Vicki, it sounds like a rental to me–but you need to check with a local lender in your area. It really doesn’t matter what I think–a lot is left for the underwriter to decide.

  78. My husband and I refinanced our home very recently with every intention of residing there for at least a year or longer, (and have lived there for the past 4 years).
    We came upon an incredible deal on a new house, and want to purchase it. We would like to rent it out since we are not quite ready to move, and it will earn more in rent than our current home – however – we are learning that it would be illegal (if we say it is our primary residence).

    SO, we will move into it in order to get the lower interest rate. If we then rent out our current home that was just refinanced, would we be committing fraud?

  79. Roberta, it would be the lender’s call of where you refi’d of whether or not they believe you.

    And yes, claiming to live in a house in order to get a better rate is fraud. You could always check into buying the other house as an investment property.

  80. Similar to Roberta’s question….. 6 months ago i refinanced a house that i lived in for 6 years. My intention was to live there indefinately, but a week ago i got married and moved 3 hours away, changed jobs and started a new life.
    I would like to buy a house and rent my existing house, can i legally do this? What i signed when refinancing that i would occupy the house for 1 year except for extenuating circumstances. Just wondering what constitutes extenuation circumstances (moving 3 hours away? job change? getting married?) If it matters my wife applied for several jobs where my existing home is and couldnt find anything. Thanks for your info!

  81. chuck, the difference between your situation and Roberta’s is that with your situation, you’ve had “life changes” take place–with R’s, it was just spying a “must have house”…not life changing. However with that said, it’s ultimately up to your lender IF that’s acceptable with them.

    I found this website interesting which appears to be written by an attorney about the due on sale clause: http://www.johntreed.com/dueonsale.html

  82. Bought a new house which we’re moving into. Don’t want to sell the old one just yet (not in this market). Have a 30 yr fixed on the old one with a rather low rate. Mortgage was obtained for owner occupied and indeed lived 6 years in that house. Does all this mean that I’m jeopardized that the lender can learn that I moved out of that house and ask me to refinance or pay off the loan in any other way? FWIW, the loan to value ration on that first house is something like 50/50.

  83. Peter, if you lived in your old home with your mortgage for 6 years–you are just fine. As long as you continue to make your payments on time, you shouldn’t have any worries.

    The difference is folks who are doing this within a year or so of obtaining a mortgage. They are at risk of the lender calling the Note due or ??

  84. Hi Rhonda,
    My question is…. We own a primary residence in Huntington Beach CA, Have a vacation house 315 miles away in Lake Havasu AZ.for sell, no mortgage. Have a contract for another house in Havasu. Was told by realtor no problem with loan as long as we are under contract to sell original vacation home. Now broker says new place has to be an investment property??? We must sell original to fix up the new house. What is the ruling on 2nd home purchase/sell exchange? Teresa

  85. Teresa, it really boils down to the underwriter/lenders call. You can try another lender to get their opinion… however I can see why they would make this decision in this economy.

    What happens if your other vacation home does not sell and you wind up w/two “second homes”. Guidelines only permit one second home–homes after that are investment.

    Ask your lender if they can make an exception once your second home that you have listed is under a bona fide contract or if it has to be closed.

    If you really want the new second home, you could buy using investment financing and refinance once your other home sells (depending on loan to values, etc.).

    Good luck.

  86. Hi Rhonda,

    My partner and I are trying to refinance a home. He’s on the deed and mortgage, i’m just on the deed. We pretty much split time between our apartment in Brooklyn and the home 120 miles away in the Catskills.

    We also rent that house out as a vacation rental.

    In June our lender took our non-refundable fee, looked at our taxes, we got the house re-appraised, etc,. to the tune of $500. We got a Good Faith Estimate. Then in July we were told we have to pay an extra point due to some changes in Fannnie Mae.

    Now we’re told because we have a website and clearly rent the house out, it’s an “investment property” and we have to pay 2 more points. Admittedly my partner did write some of it off on his taxes, but we thought if we occupied it a certain amount of the year we’d also be a primary residence for loan purposes.

    The address is on my driver’s license and business card (I’m a massage therapist and work both places). We’re there quite a bit, and sometimes play, sometimes work on the house, sometimes just work. (We both don’t report to an office and can take our work anywhere.)

    Where does one actually draw the line? Is our bank truly just responding to current industry pressure? What can, and should we do?

  87. Hi Rhonda, I have a question about a primary residence as it relates to the first-time homebuyer tax credit.

    To be eligible, you have to have not owned a primary residence in the last 3 years.

    Within the last 3 years, my brother and I owned a house together. He lived in it, but I didn’t (I lived in a rented apartment). We both paid the mortgage out of a joint account but I claimed the interest on my taxes and he didn’t. Will this house be considered a primary residence for me? We have since sold the house and I am currently still renting.

    Thanks very much for your help.

  88. Buyer, I recommend that you check with your CPA.

  89. Maureen Jacob says:

    Hi Rhonda, My husband and I own a business in NY in a seasonal resort area. We have been living in an apartment my parents own -rent free. For 6 years we were FL residents and worked 8 months out of the year there then 4 months where we are now. The last 8 years we have run our business which only sees a profit during the season – there are months we do not even open. We wish to start working in FL again the same area which has an opposite and longer season- I already have employment-we have contracted for a house but are having primary residency problems- we are trying for an FHA loan. How can we show we can keep our business in NY and reside and work in FL as residents there? thanks Maureen

  90. Maureen, you hit the nail on the head…you need to be able to prove to the underwriter that you can run your business in New York while living in Florida. For the most part, it’s up to the underwriter whether or not they will accept your explanation.

  91. Dawn, it sounds like you’re doing everything right. You might have to try finding another underwriter/lender and disclose all of this information upfront. With that sad, right now it seems lenders are looking harder at reasons why not to make a loan than why they should due to the “Red Flags” rulings.

    Even a few years ago, I had clients who live in Alaska and who were truly buying a second home in Des Monies, Washington (which is a coastal town)…but the lender’s underwriter decided it wasn’t a “resort area”. It boiled down to being their call which I think was wrong at the time…but they did have to buy with a non-owner occupied rate and a few years later, they were able to refinance owner occupied (I found a different lender and their personal scenario had changed to allow me to go more “conventional”).

    Try getting a second opinion–if you’re working with a mortgage broker, they may be able to check other lenders for you. Good luck!

  92. Hi Ronda, I am planning to buying my first house as principle residence. After reading the some articles on definition of principal residence, I have a question. After purchasing the house, if my company transfer me to a different state or country for a long term assignment with in one year of purchasing the home (as you know that economy is very unstable now a days and we never know when we get transfered or layoff), can I rent the house or atleast keep the house empty till I complete one year and then rent it. Also do I need to inform the lender or do lender find on his own. Could you plese tell me what laws and rules and regulations says in this regards. Thanks Thatha

  93. Hi Thatha, I cannot provide legal advise–you may want to check with an attorney who specializes in real estate to run your question by them.

    It may boil down to intent and when you had knowledge of the transfer and it will be up to the lender if they want to proceed with any actions. It’s possible that this would be viewed as an extenuating circumstance beyond your control (per the language of the Deed of Trust).

    I don’t believe that you need to keep the house empty until a year has passed…but you need to discuss your concerns with your mortgage originator and possibly an attorney.

  94. Hi Rhonda, I am thinking of buying a studio condo for my daughter, who is enrolled in graduate school not far from my home and the studio. My daughter has little income and short credit history, and I am afraid that if she and I were the co-signers on the mortgage, we may get higher interest rates or not get approved at all. Since it is graduate school rather than college and the condo would be too close to her parents’ house, I am not sure if the purchase may qualify for the Family Opportunity Mortgage. Can my daughter and I be the owners, her being an owner-occupant, whereas I will be the only borrower, to qualify for owner-occupied mortgage rates? Thanks, Sasha

  95. Hi Sasha, can you give me more information about the graduate school? Is it attached/related to a college? Also the guidelines state that the new property needs to be a “reasonable distance” from your current residence. If the scenario qualifies for a Family Opportunity Mortgage, then you would be the only borrower.

  96. Rhonda, thanks for the answer. The graduate school is a Master’s program within a big-ten university, which has colleges with numerous Bachelor’s programs. The distance to the new property from our current residence will be 21 miles. Will this meet the “reasonable distance” test? If not, what would be our options?

  97. Sasha, it’s going to be an underwriters call as far as “distance”. Are you buying in Washington?

  98. Sasha, I’m only licensed to assist with mortgages on homes located in Washington. Send me an email at rhonda (at) mortgageporter (dot) com and I’ll offer some suggestions for your area.

  99. Hi Rhonda,

    First, thanks for your helpful advice on this thread. I have a question: I have a conventional owner-occupied mortgage, have lived in the house for 2 years, and just received a pre-emptive loan modification offer from a 5/1 ARM to a 30 year fixed.

    However, because of a work project, I will need to work internationally for a short period of one or two years. I intend to keep the house as my primary residence when I come back, but I will need to rent the house while I am gone. Obviously the house was owner occupied when I applied for the modification, but soon will not be. I have already been in the house for 2 years, but does the modification reset the occupancy clause? Should I turn down the modification for this reason?

    Thanks!

  100. Stevens Johnson, I don’t do loan mods so I’m not familiar with the language or terms. I recommend that you contact a real estate attorney. Good luck!

  101. Rhonda,
    With regard to homeowners insurance, how does one determine if a home is a second home, vacant or unoccupied? We currently live in Alaska, and purchased a home in Missouri one year ago, with the intent to move within 6 months. Things didnt work out the way we planned and now our move is delayed until April 2012. Last week we recieved notification from our insurance company that they will not be renewing our policy, because they consider our property “vacant.” While we are not living in the home full time yet, we have been moving personal items into it, and purchasing new appliances, etc. We spend 10 days at the home approximately every 3-4 months. What determines our status?

  102. Hi Rhonda-
    My father passed away and had owned his parent’s home (I assume as an investment property since he did not live there at all). Through the estate, i have inherited the home. I want to refinance it to get the monthly payment down lower while interest rates are lower. The home is in Ohio, I live in NY. I drive home most weekends though. So i “live” there maybe 50-72 days a year. My grandparents live there full time but do not pay rent.
    I’d love the refinance to qualify as a 2nd home rather than investment property because the rate is lower. However, I’ve just realized i don’t even have a 1st home mortgage, I rent in NY, so am I screwed? Could I get a job in Ohio and change my address to that home’s address and just say i work and rent in NY? Help is appreciated!!! :)

  103. Samantha, you really need to speak with a mortgage professional in your area – send me an email and I will recommend one. In my opinion, your refinance would not be an investment property.

    You need to be upfront with whomever you wind up working with…everything that you provide on the loan application is verified and documented.

  104. Hi Rhonda my mom is about to close on a primary residence where she is going to live but she is separated form her husband. The title company want his signature acknowledging the purchase but he refuses to do so.My mortgage advisor have recommended her to buy the property as an investment . Do you think this is a good move?

  105. Patrick, it sounds like your Mom is buying in a community property state, like Washington. Typically the mortgage company (not just the title company) will require the separated spouse who’s not living in the new home to not only acknowledge the new mortgage, but to also sign a quit claim deed to make it clear the other spouse has no interest in this property. If your Mom buys the property as an investment property, there will be different down payment requirements, interest rates and underwriting guidelines required. Whether or not this is a good move is really up to your Mom.

  106. Hi Rhonda,

    mortgage question for you. we live in Arizona – but our daughter goes to UNC Chapel Hill (sophomore) and we have another daughter who is planning to go to Chapel Hill in two years – after high school. My wife would like to live in chapel hill – but i’m so-so on that idea. We just signed a purchase agreement on a home out there – that is walking distance to school. My daughter would live in it for the next two years – starting in june – when she out of her sorority house – and then my other daughter would live there. But what happens if my second daughter doesn’t get accepted to UNC or goes somewhere else. can we then rent the house out? also, when my daughter studies abroad for one semester she won’t be living there – but we’ll get some rental income from whoever she sublets it to. I”ve explained this to the mortgage company and they say i qualify as a second home owner – but it seems to me that if this ends up as an investment property i wonder if i should classify it that way now?? Suggestions??

  107. Hi Scott,
    if your mortgage company is viewing this as a second home, they’re probably right. You can ask them if they’ve had an underwriter review your scenario.

    Most lenders are anticipating that the home will be occupied for the first year.

    Congrats to your daughter(s)!

  108. Hi Rhonda,

    My wife and I just refinanced our current home as owner occupied, for my parents to live and use the monry to purchase a new home as our primary home, do we have to purchase the new home as a rental? I was told it is ok to buy as owner occupied as long as we move in within 30days of closing. Were we missed informed by the broker

  109. D – it’s not really something I can completely answer. Fannie Mae could allow this type of financing if your parents are elderly and do not earn enough income – the other factor is if the lender who the broker sold the loan has any underwriting overlays that would make this not acceptable.

    Buying your next home could be treated as a rental by the lender if it’s two close to the existing home and the lender/underwriter doesn’t view it as a second home. You may need to seek a couple of opinions from mortgage professionals in your area.

  110. Hi Rhonda,

    One more question would the lender consider this breach of contract and call the loan due? And what if second lender approves second home as owner occupied as long as we move in within 30 days of closing ?Thanks for your advise.

  111. D, there is no way for me to know what your lenders may do. I’m sorry!

  112. Hello, Rhonda, thank you for this informative website. Please help me figure this out… Right now, I’m Homeless, I have no address or place to live. I also have medical condition that makes it particularly hard on me. I’m planning to buy a cheap house somewhere in South West or Nevada (where they’re cheap), to live for about 3 months… I want to buy for cash.

    I want to buy HUD home or foreclosed home for owner-occupants as this is my only chance to buy anything at all and get ahead of investors, as I have very little money and no job. I literally will end up on the street completely if I don’t buy now, as it’s also impossible to rent as I have no job and my condition wasn’t too well.

    Once I live in house for about 3 months, I plan to be somewhere in another state working for engineering contract…. With my profession, I can ONLY get jobs in certain areas, which are the most expensive and I’d never afford to own a property in the areas where the jobs are. I plan to come back to my property later and live there for a few months…. then do another engineering contract elsewhere, where I can land it.
    Can this property be considered owner-occupied, even though I wouldn’t live there full-time after first 3 months? I wouldn’t rent it out. It’s just I have to be somewhere else for work so that I can eat. But this would be my home, residence on my car registration, tax return, etc. I’d have to be away after 3 months for economic cicumstances, as I literally can’t afford a place anywhere near where the jobs in my field are and I am homeless and becoming extremely desperate.

  113. Hi Set Go, it sounds like it your scenario could be a considered owner occupied if you’re not renting it out. If you’re paying cash – you don’t have occupancy issues with the terms of the mortgage. If your concern is regarding the purchase and sale contract with HUD, you should run your scenario by them.

  114. My husband and I are considering buying a second home in another state. We plan on using the home for a month or more each year and are wondering if it would still qualify as owner/occupancy if we were to rent it to a family member during the times we do not occupy the home?

  115. Connie, you need to discuss this with the lender who will be helping you with the mortgage. Are you planning on living in the home for 2 months and then renting it to family for 10? Will you be declaring the rental on your tax returns?

  116. If it would qualify as owner/occupancy then yes, we would live in the home part of the year and rent it to a family member when we are not there for a minimal rent and claim it on our tax returns. If it would not qualify, we would consider letting family stay in it rent free and have them just pay the utilities. I’m a little confused when I read the tax laws regarding what qualifies as a second home (if you are in it 2 plus weeks and then you can rent it out the rest of the time). Is that not considered owner/occupancy?

  117. Connie, tax laws and underwriting guidelines/or how an underwriter will view your scenario are apples and oranges. I recommend discussing your scenario with a local licensed mortgage originator who has direct access to their underwriters and who will review your scenario directly with an underwriter.

  118. I am nearly through a re-finance on my current home as as a primary and it should be finalized in the next week or so. Since we started the re-fi process we found a house we may want to purchase and move into. We would not make settlement on our new home until late June or July but we might consider keeping our current home for other family or eventually renting it. Are there any issues with this?

  119. Matt, Lenders anticipate that you are going to occupy the property for at least a year. It’s in the actual language of the deed of trust. Having family live there and not collecting rent is different than renting out the home.

  120. Hi Rhonda,
    My husband and I purchased a home in another state while he was active duty military. We relocated and rented the home out, now we are being relocated again however for a longer term and want to purchase a second home. The first house has been rented since 2010 and has been reported on our taxes. Is it possible for the second home we purchase to be considered our primary residence? Thanks!

  121. Christina, are you going to live in the home?

  122. Rhonda,
    My family purchased a vacation home in a resort community about 4 years ago. We filled out the paperwork as a second home. There are 4 of us on the loan documents. We stay there about 7-10 days out of the year and rent it out the rest of the time. Have we committed fraud by not classifying this as an investment property in the loan documents? From your article it doesn’t sound like it but I want to be sure. Thanks!

  123. If you are staying in the home for 10 days a year and renting it 355 days a year, it sounds like a rental to me.

    Do you declare rental income on your tax returns?

  124. Yes, we always declare the rental income on our taxes. We file the K-1 form through a tax accountant. My main concern is if the bank would consider us to have committed fraud and say the loan is invalid and take any action against us. We do stay there but we also rent it out (about 120 days total out of the year) when we are not there to help pay for some of the cost. Thanks for the quick response.

  125. Hi Rhonda,

    I’ve found a cabin for sale that I am interested in purchasing as my primary residence (I’d be a first-time home buyer), however, while it’s titled as residential, the county has assessed it as recreational, and I think this will give me trouble securing conventional financing for it – do you agree?

    After reading your post above, it seems that if this will be my primary residence, I should be able to secure conventional financing for it?

    Thanks in advance for your response,
    Josh

  126. Josh, I’m really not sure how the lender would view it. As long as you’re going to occupy it, it makes sense (for example, it’s close to your employment) – you may not have an occupancy issue.

  127. monica hogan says:

    I have owned my home for 15years solely. I always made my mtg. payment on time until last year when I lost my job. I applied for help from nchd until I was re-employed. I lost over 20k in annual income. I am trying to modify my loan now as a last resort. I took a job that is 5hrs. away from home and only get home on the weekends. I do not pay rent where I stay during the week. Is my home still a Primary Residence. I don’t rent it out. Thank you for any input.

    • Rhonda Porter says:

      It would appear to be primary to me however, what’s going to matter far more than my opinion is what the lender thinks. They’re most likely going to question your living expenses during the week and factor that into your debt-to-income ratios.

  128. Monica Hogan says:

    Thank you Rhonda for your quick reply. I am hoping I can save the one thing I have worked all my life for, but it doesn’t look good. I can’t believe I have to start from scratch at 46yrs old. Thank you again!

  129. Hi Rhonda.

    Thanks for the helpful information!

    I am considering the possibility of becoming an owner-occupant of my rental property and want to know to what extent I would have to do so to legitimately refinance my mortgage as an owner occupant.

    I own a spacious, beautiful home on 5 acre hillside property with gorgeous views.

    I last refinanced it with Wells Fargo in 2002 for a 30-year fixed rate of 6.625%. I bought out my ex-wife’s share, fixed up the property and rented it out. A great family of tenants occupies the 3 bedroom manufactured home. My property also includes a separate studio (or “granny unit”).

    I have made two attempts to refinance, both unsuccessful so far:
    1) Straight refinance through Wells. I was denied because the secondary markets (Fannie and Freddie) won’t buy a lender’s loan on a manufactured home that is an investment property;
    2) Loan Modification through HAMP 2. I cannot qualify unless I am two months delinquent on mortgage. Even if I were to try that (and screw up my very good credit score in the process), I believe I am unlikely to qualify because my loan is $177,000 and home is worth $450,000. I believe the bank would benefit more by default than by modifying my loan to a lower interest rate.

    I am living with my girlfriend, rent-free, about a hundred miles away. If I were to move in to the granny unit, sleep there on a regular basis for a year or more, leave clothes and get mail there, etc., could I also sleep at my girlfriend’s place and still be an owner-occupier of my property?

    • Joe,
      To legitimately be able to refinance a home as your primary residence, you need to live there a majority of the time. This needs to make sense to the underwriter. If you’re renting out other residences on the property and living in the “granny unit”, this still looks like an investment property to me. Have you tried refinancing this as an investment property – you should be able to drop your rate even with a non-owner occupied rate.

      Your biggest issue is going to be the manufactured home. We no loner lend on manufactured homes. I’d start with trying to find someone who does (probably a portfolio lender) and go from there.

      Good luck!

  130. Thanks for the clarification Rhonda. Do you have any advice on seeking a portfolio lender. They seem more scarce than the last time I refinanced this home, 10 years ago.

    Thanks again for your prompt reply and good information.
    I was lucky to find your site.

  131. We are having difficulties refinancing because both of our properties located within a mile of each other. We do not rent either and they are not investment properties. We have provided all documentation to lender that support pne property as primary but lender is calling it investment property. They have done a research on 411.com and found out my daughters name on the website. She also changed her name and she used to live with us. So she left but the phone was left in her name. So statements also go to a second home. So based on statements and 411 .com and disregarding bank statements 1099 tax returns ad dl license addressses bank insists it is investment property. How can i prove i am not a frog but a human? We are also naturalized citizens so we have different way of life and decision making. This is very frustrating as both properties are ours purchased at different times and bill addresses were never changed because it is a hassle. I had no idea 411 website info supercedes tax returns address and 1099 and bank statement

    • Larisa,
      I’m confused, do you own both properties or do you own one and your daughter owns the other property?

      If you own both properties, odds are, one will be treated as an investment – even if you actually live in both homes that are located a mile apart.

      It doesn’t have anything to do with proving your human or have a different way of life. It’s underwriting guidelines for conventional mortgage programs.

      • Thanks for reply. We own both properties. Daughter just lives with us sometimes. Well why not then for a bank to call a right property as investment one? Instead they did just the opposite. They called our primary property where we file our taxes as investment. And they identifird our investment as a primary. All becase many years ago our daughter who luved with us at a time put the phone line in her name. And they found that by checking on 411. Com. My question is this does 411 supercedes tax returns? Bank statements address? This is ridiculous. We have changed phone number nack to our name as of today. Only to prove that service bills prove nothing. Bank should go by tax return address. Especially if they asked address to be proven by bank statements yet they look at 411 website.

        • Larisa,
          I think it comes down to the underwriters opinion, in that case, as to which one is the primary or investment property. Is your true primary a larger or nicer home? That can sometimes carry weight too.

          You might need to get a second opinion from a local mortgage originator who can run your scenario by an underwriter.

          Good luck!

  132. Yes What underwriter calls an investment is a bigger and nicer and newer home. Our second one is a small older townhome. I have already contacted wells fargo corporate office and placed a complaint. Underwriter got all the documentation she requested and she played sherlock holmes. In that instance she should not have asked for anything. 411 has no weight legally and will not hold anywhere for anything. Underwriter is some undereducated individual who goes extra mile when it is not needed.

    • Larisa,
      it’s the Underwriter’s challenge to review the scenario and make sure the loan meets all guidelines. Sometimes this means they are using their own personal judgment. It’s not unusual for an underwriter to view a smaller home as the rental and the larger, possibly nicer home as the investment.

      I don’t know of any underwriter who would permit a second home within a mile of the primary. The underwriter wouldn’t even need to rely on 411 to make a decision – it’s up to them.

      The only possible program I know of would be Family Opportunity, which requires specific criteria as well.

      Worse case, if your property is treated as an investment, assuming it meet LTV requirements or qualifies for HARP – rates are great for investment properties as well.

      If you don’t like the lenders response, get a second opinion. I think you’ll find they agree with this underwriter.

      You might have to go for un-conventional financing – portfolio lending or hard money (investment rates w/conforming would probably be a better route).

  133. Thanks Rhonda. Again we are mot concerned about a second home. We are concerned about our primary property that underwriter labeled as an investment. It is not an investment property we live there. We want to refi it. We were asked to provide all documentation which we did. But underwriter saw 411 with our daughters name attached to a phone number and this eas their reason to decline. They saw this once we applied for a refi. Then they asked for explanation and documentation. All eas provided. Then they declined. I am not sure i can explain it better to you. We are puzzled why underwriter swapping home statuses and call our primary residence an investment. We honestly do not need underwriters own judgement especially if it is clouded. There are guidelines and so far all documentation was provided and supports this as primary residence. We do not care about second property at all. We want to refi bigger house. Does it make sense? Anyhow i have complain department involved in resolution znd they will follow up. In other words underwriter disregarded all documentation she asked for and decided to go with her feeling or opinion. I do not need opinions. I need resolution based on documentation requested. Fyi. I i will try to refy smaller condo i will be told that this is an investment property brcause my tax returns have bigger house address. So bank will have both propertys as an investment properties. That cannot be if we only have 2. Does it make sense?

    • bottom line, with the lender you are working with, it is the underwriters call as to how they view the properties. I can understand where they are coming from even if you are living in the smaller home as your primary residence. And my opinion of your scenario is irrelevant – I’m not underwriting your application for a mortgage.

      You can get seek other opinions from other lenders.

      Good luck, Larisa.

  134. Rhonda i am sorry we are having a disconnect. We are living in a larger home. Not smaller one. It is a larger nicer newer home that is our primary residence. But underwriter says it is an investment property because they found 411 listing with our daughters name. And her last name is different than ours. We have provided rxplanation as requested to no avail. I think you are mixing up both propertirs. Again our tax returns bank statements 1099 dl licences all have larger property on them. Underwriter is ignoring it and states it is am investment. It cannot be. First you seem to be mixing up properties and stating we live in a smaller one. That is incorrect. Second you seem to be saying that if you own both homes in a close proximity one will be considered a rental and second one is an investment. How can that be? So you own both and neither is a primary residence despite documentation and the fact you live in one of them? This is why i stated that this is unusual set up because we are different culturally thus our business approach is not average. Legally one of the residences is a primary property. It is a larger one. That is where we live and the one we want to refi. But yet underwriter pulls a fast one and she stated the decision is based in large part on 411. I will make sure internet site that holds no water legally does not stand in our way. 411 is not a part of federal guideline. In this case underwriter will do better if she thinks less not more. Thanks

    • Larisa,
      I did misunderstand – it’s from your first line, three comments ago.

      Regardless, lenders typically require roughly 50 miles distance from a primary residence for another residence to be considered a second home. It also has to make sense to the underwriter that this is a second home or vacation property. THIS IS AT THE LENDERS DISCRETION.

      I once had a client who’s primary residence was in Alaska and they were buying a home in Des Moines, Washington for a second home. Obviously we met the distance requirement. The underwriter, where I was brokering the loan to, decided it was an investment property. Why? She didn’t think that Des Moines was a place where people would vacation.

      I disagreed with her then and I do now. However, it was her call as the underwriter for that loan. (Our “in-house” underwriters would have never made that call).

      The underwriter did not pull any “fast ones” one you, in my opinion. They’re doing their job and following guidelines.

      You may have to try a lender who doesn’t follow conforming guidelines – one that is a portfolio lender, perhaps a credit union? They may have slightly higher rates if they are portfolio – but they may be able to close your loan.

      There’s not much more I can say here.

  135. Hello,
    Are these laws for investment vs second home the same for all states?
    Also, if we take out a second home loan, are we not able to rent it out at all?

    • They’re not laws, Sandra. They are conventional underwriting guidelines. However, if someone does not follow the guidelines and they misrepresent themselves on a loan application (for example, state they’re going to occupy the property or that it’s a second home/vacation property, and then they rent the home immediately, they are committing fraud, which is breaking laws).

      You can rent out your primary or second home after a certain amount of time – lenders anticipate that you will not use it as an investment property for 12 months – that you will use it as intended. I have the language from the deed of trust highlighted in the body of this post:

      Borrower shall occupy, establish, and use the Property as Borrower’s principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower’s principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond Borrower’s control….

  136. My fiancées father is wanting to purchase a house for her. His credit is much better than her’s and would get a better interest rate. Do most lenders look at this as an “investment ” property even though his daughter and granddaughters would be occupying it? He was told from a real estate agent that it would most likely require 20% down as well. Do you know any programs out there that would require less of a down payment (5% or less). He is retired from the Navy. Thanks in advance for your advice

    • David, if the property is less than 50 miles away from his primary home, most lenders will view this as an investment property – which will require 20% down (unless the home is a Fannie Mae Homepath property, which would allow 10% down on an investment property).

      If his daughter is paying rent, it would also be considered a rental property (regardless of distance).

      If her credit is strong enough, she could consider buying a home using FHA for financing and her father could provide a gift that covers the down payment and/or closing cost. FHA financing currently allows as little as 3.5% for the down payment.

  137. I am told I have an unusual situation. I am recently divorced and my decree states that I can refinance the house to remove my ex-wife from the mortgage, pay her half of the equity, have her sign a quit claim deed then move back in on 10/1/2013. This is the only house I own. I am currently renting a separate residence. The lenders I have spoken to call this an investment property. I dont want to wait until after 10/1/2013 because that will complicate my ex-wife’s effort to buy herself a new house. What is your opinion/advice?

    I should add that I am receiving no payment from her during the time she is staying there. Her time there is paid for by me as part of the maintenance agreement.

    • Elliott, that is an unique situation. If you are doing this for her to buy a new home now, why not occupy the home in question once her new home is closed?

      • That is basically the plan. She wants to stay in my house until 10/1/2013 so our son can finish high school. The October date coincides with him moving away to college. Technically I’m not entitled to move back in to my house until October 2013, but in the meantime I am to refinance it and buy her out so she can make her own living arrangements.

        • Can you wait to refinance and buy her out until October 2013?

          • I could since at the moment there is no deadline specified for my refinance. However she is already making noise about having the orders revised to include a deadline, and I imagine she will try for a date that allows her to transition from my house into her own new house. I think it is in my best interest to work this ASAP. Who knows what rates will be like in 11 months? I noticed in one of your responses above that an investment property requires a LTV of 20%. I am being told it is 25% and .5% higher rate. Can the LTV vary by lender?

  138. Hi Rhonda, I’ve read a lot of your posts and thank you for being so supportive of people with answering their questions! Sadly it’s not often you seeing people being so helpful without direct personal gain.

    With that said, I have my own question :) My current home is my primary residence. I’m in the process of buying a second home in another state, and not sure what type of loan it would be classified as. I have full intention of moving into the house and making it my primary residence in the summer (~7 months from now), as I have current work obligations that make it inconvenient to move right now. From what I understand this would be a second home loan type, HOWEVER, I would like to rent that second home for a few months if I’m able to find a renter. I’m already qualified to pay for both homes with my salary so I don’t need to rent it for income but would like to narrow down the negative cash flow. I wouldn’t be able to make more money renting than the mortgage so it’s not an investment property (or if it was that would be a terrible investment!). I want to do the right thing. What do you think the loan type should be?

    • Hi Richard, I’m not an underwriter. If I had to make the call on your scenario, it kind of looks like a rental to me:

      “HOWEVER, I would like to rent that second home for a few months if I’m able to find a renter. I’m already qualified to pay for both homes with my salary so I don’t need to rent it for income but would like to narrow down the negative cash flow…”

      Have you ran your scenario by your mortgage originator? They can probably ask their underwriter before you get too deep in the process. Rates for investment properties are VERY low right now.

  139. Ooops I have that backwards. For an investment property they tell me the LTV has to be less than or equal to 75%. So the downpayment would need to be 25%.

  140. Hi Rhonda, I am active duty military currently stationed in KS but my home of record is CA. I am in the market to buy my first home with my father who still resides in CA, he does not own a home either.
    I’m being told that if I buy a home with my father and only he resides in the home, the home would be classified as an investment home?

    I have no intentions of renting this house out. I live in KS because I’m on military orders to be here. My father in the mean time will live in the home until my military obligations end, even still I would be home for a few weeks a year.

    Is this accurate?

    BTW we are not doing a VA loan since my father is not a veteran.

    • Hi Paul, why are you buying the home with your father? Are you wanting him to reside their to “house sit” until you return from duty? Your scenario is kind of a tough one – I would try talking to a local lender (where the property would be).

      If you were buying the home for your father because he cannot qualify on his own, I would find a lender who can offer the Family Opportunity Mortgage.

      • Rhonda,

        You’re spot on, we need to combine our incomes to make the loan work. But I still don’t understand how our property would be classified as an investment property even though neither of us own a home and at least either one of us will be living there at all times?

  141. Hi Rhonda,

    If I live in a single family home and rent out the other rooms to unrelated people, is the home still a primary residense? Will I be required to upgrade the insurance policy to renters’ insurance? Also, can I keep the same 30-year fixed rate if I move out after 12 months after occupancy and turn it into an investment property?

    • Hi Steve,
      Have you already obtained the mortgage on the home that you’re planning on renting out rooms? I cannot answer your question regarding home owners insurance – you’ll need to speak to your insurance agent regarding that. You can move out after 12 months and use your property as an investment property. Do verify with the language on your Deed of Trust and Note and seek the advise of an attorney.

  142. My wife is purchasing a home about 90 miles from where she works. She’s the sole purchaser – I’m not on the loan or title. I have bad credit from prior to our marriage.

    She intends to keep our (rented) apartment near her place of employment, and commute in to work Mondays, stay all week, and commute home Friday nights.

    Additionally, she is off work about 20 weeks a year and would be home full time during those periods, minus any vacations.

    Three nights a week for half the year and full time the other half *would* generally be considered OO, wouldn’t it?

    Her lender has already said the distance in itself is not a problem. I would be living at the home in question full time, but then, my name isn’t on the loan.

    • Hi Marc,
      Does your lender have a problem with this scenario? If not, then it sounds like you’re good to go :)

      I’m guessing that my underwriters would want to know why your wife is buying a home to live in when it’s 90 miles away from her employment. Your wife would also need to qualify with the rent payment to the apartment as part of the DTI ratio too.

      • We live in Southern California. Homes near my wife’s place of employment are simply out of our reach. In the area we’re buying, we can get the same home for 1/3rd the price and it’s only about 35 miles from my place of employment.

        Insane commutes aren’t all that uncommon in our region – we currently head 30 miles from our apartment in opposite directions every morning.

        It never occurred to us to bring up the ongoing rent payment. Thank you for your answer. We really don’t want to misrepresent anything. Better to have the deal fall apart *before* signing a loan, if it’s going to.

        I think it should be ok. The home is only half the amount the lender told her she could qualify for.

  143. Hi Rhonda,
    My husband and I are looking into buying a house. I am a first time buyer. He co-owns a house with his mom and sister and his mom is still living in that house. With that said, how will the house we plan to buy be considered for? It is our primary residence but will that be considered as his second home and thus require a 20% down payemnt? Will his mortgage payment for his first house be considered as our monthly debt on our application? Thanks for your help.

  144. Rhonda,

    Hoping you can help me. I currently live in a 3-BD home which we refinanced from a 30-year mortgage to a 15-year mortgage last year (8 months ago). The loan was sold to Fannie Mae.

    Since then, we’ve decided that it’s time to move up to a larger 4BD house. The mortgage lender is telling us that the new home will be considered investment property, even though we’re moving into it and selling our old house.

    This is the most bizarre thing I’ve ever heard. They claim we signed a document as part of the refinance saying that we intend to stay in our house for a year, which we did because it was true at the time, but we now want a bigger house, due to having small children.

    I thought that our situation is fairly normal with a growing family, so why is moving into a bigger house causing issues with our mortgage lender? Don’t people trade up all of the time and what is the concern on the part of the lender?

    • Scott,
      I cannot provide legal advise and you should seek advise from an attorney. Check out your Deed of Trust, it probably states something along the lines of intending to live in the property for 12 months. If you do not have a copy, your lender or the escrow/closing company should.

      Have you tried being preapproved with a mortgage lender? It’s quite possible that Fannie Mae may pick up on it and you may need to be able to convince an underwriter that you did not know at the time you were going to buy another home – especially since you’re not converting it to a rental and you are selling it.

      Good luck!

  145. Hi Rhonda. I currently have a mortgage on a coop and have lived there 6+ years now. There’s currently a 2 bedroom in the same building which I am interested in. My dad wants to take out the mortgage on it for me (either in his name only, or both of us. He would be putting all the down payment.) and list us both on the deed. He owns a home outright (mortgage paid off). Would this be considered an investment property for either of us? I plan on selling my current apartment.

    • Daniella, are you going to occupy the other unit? If so and the other property is going to be sold, then it should be owner occupied, IMO. If your current property is not sold before closing and it is larger or viewed as more desirable from the underwriters eyes, they may treat your new purchase as an investment. These are questions you need to ask a local mortgage originator. Good luck!

      • Thanks. I am going to occupy the other unit. It’s a 2 bedroom and I jut had a baby. My current apartment is a 1 bedroom.

  146. Hi Rhonda,
    My brother and I are thinking about buying a house together which he will be occupying. He will pay part of the mortgage, and he’ll find a roommate whose rent we’ll use to supplement the mortgage. I live about 60 miles away, and I live in a rental apartment (and will continue to do so). I will be “investing” in the property – we will split the profit from appreciation as well as the gained equity upon sale of the house. We intend to keep the property for many years. What are the tax implications of what we plan to do? Can we somehow claim it both as an investment property (for myself) and an owner occupied home (for my brother)?
    Thank you in advance for your help.

    • Also, when we apply for the loan, can we claim it as an owner occupied home or do we have to claim it as an investment property?
      Thanks again.

      • Hi Nancy,
        You need to speak with someone who specializes in income tax regarding what tax implications may be. I’m not a CPA or tax specialist.

        Why are you buying with your brother? Does he qualify for the mortgage on his own?

  147. Question: We just did a Va streamline refinance about 2 months ago with same lender. Prior to this we have lived in this house 6 years. My husband just retired from the military(2 months after refinance). He has started a new job 2 hrs away. We are planning to move at the end of the school year(june). We can qualify for another mortgage on our incomes(we are still under DTI ratios with 2 mortgages and have 780 credit scores). We will try to sell the house but will most likely end up renting it due to low equity. Do you think there is a problem with renting a house after refinancing it 6 months ago? At the time we thought we would be staying in the same area but he got a better job offer 2 hrs away. Also, we have already lived in the house 6 years, but I keep hearing people talk about having to live in the house for 1 year. Not sure if the refinance means anything with that timeline or if that’s just for new loans.

    • Jenn, the 1 year time period for living in the home is probably in reference to the language that is most likely on your Deed of Trust that states you intend to occupy the home. You need to check with who will be the lender on your next loan to see if they would have any issues. It sounds like you will be able to document your situation with your husbands new job so you should hopefully not have an issue – you’ll need to check with the potential lender of your next home.

  148. Clif Taylor says:

    Rhonda thank you for this web site and your reply
    I and my son are purchasing a home for his family (TX) – I will co sign, they do not qualify by themselves for that amount of mortgage. I will make payments for that difference in amount until they can afford it.
    5% down loan approved by the lender and prospective PMI has come back one day before closing saying without me being in the house as my primary they will not issue that policy. Lender is searching for another PMI source. We countered that I can make that my primary residence staying there as they wish and not sure if that will suffice.
    Do you know of any other solutions to this issue beyond 20% down payment or me moving in with them beyond their 60 days requirement, which on day 61 I can move back out. What else could I do to make their concerns go away and hopefully still stay in my house,
    Thank you very much

  149. I have a question, not a comment and hope you can reply.
    My wife & I are educators. We a currently in the process of buying a home in a different state. The bank asked if we were going to continue working…the answer was probably for a year or two more.We now have a paper we are to sign regarding mortgage fraud and on the paper it states this residence as a second home ( we are living with relative now since we sold our home a couple months back).
    The issue we are having is…is it fraud if we decide within the next few months to retire from our jobs and move into the new house?

    • I don’t know what your letter states. Does it address occupancy or employment? If you decide to move into the new house – I wouldn’t think that would occupancy fraud.

  150. I currently own a home and have lived in it for four years though I just refinanced last month. Now I want to purchase a new home closer to downtown but only 5 miles away from my current home. I want to make the new home my primary residence and rent out the original home. 1. The new home is a HUD home, so will I be able to buy it, as in will I be able to qualify for it as a primary residence. Again, I will be living in it and renting out the first home. 2. Will I have to change anything like the interest rate of the original home or will I have to pay investment interest rates for the second purchase?

    • Nicole, did you know you were going to buy a new home when you refinanced last month? I don’t know if you were to contact your former lender and let them know it’s now a rental, if or what action they would take.

      I also do not know how HUD would view the recent closing of a refi as owner occupied. Many underwriters may look at your new home purchase as a rental and I’m not sure that will fly with HUD.

      I really cannot advise on your situation.

      Also – just a reminder to my readers – I’m not an attorney – I cannot give legal advise.

  151. michelle macdaniels says:

    My husband is army and we are in GA for now. But we would like to get a home in Michigan as he only has 5 years left in the military. Would we qualify for a FHA loan? I plan on living there year round while he finishes his contract.

  152. Hi Rhonda,
    I have owned my house for 10 years. 2 years ago, I moved to another state for work and have been renting it out to a friend. I have a new work-from-home job and I’m going to move back into the house and continue to rent a room to my friend. My plan is to start traveling around the country in a few months (once my current employment contract ends). So lets say I move back in April and stay through July. I need to refinance to get my ex husband’s name off of the mortgage. Do you think i have a problem refinancing as my primary residence if I move back, have my things and my permanent address there, but spend 85% of my time traveling? I worry that because a renter will still live there, that they would think I’m trying to commit fraud. I would have no other residence, though. Just my car and a popup camper. Thanks.

  153. Rhonda,
    First of all, thank you for maintaining this excellent website.

    Unfortunately, my wife and I work in two different cities (over 100 miles apart from each other). We have rented an apartment in each city and during the weekend, I travel to city she lives.

    We recently decided buying a house where she works thinking it is going to be the city we will live in the long term. Due to her credit history (or lack thereof – her name will be on the deed though), I applied for a mortgage and we are in the process of closing the house as our primary residence. The lender knows that I work in a different city and they did not make any problem out of it.

    Now, due to the rent increase for the apartment I live during the week, we decided purchasing a small apartment for me as well. We are waiting to close the first house so we can start the process for the next one. I will not have any problem for qualifying for the mortgage.

    My questions are considering that I will be living there 5 days a week, would this new apartment (house) would qualify for the primary residence? Also, I have a colleague, who is in a very similar situation (his wife works in another city and they already have a house in the city his wife works, he also travel between cities). We were discussion that we can purchase an apartment together and live in a much nicer neighborhood. If we purchase a house together, would that house be considered as a primary residence for both of us?
    Thank you in advance!

    Regards,
    Johnny

    • I would think that if the property is 100 miles apart that it might qualify for a 2nd home. You’ll need to run this scenario by the lender you decide to work with.

  154. Hi Rhonda,

    Right now I own a home that is 25 miles from my office. I am interested in buying a 2-4 unit building near my work (1 mile away). I intend to occupy one unit and rent out the other two or three units to someone else. Can I qualify this a a primary resident?

    What if I put my current home up for sale? Can I qualify the multi-unit building as a primary home? Does it show the intention to occupy?

    Thank you very much.

    • ND,
      It’s really up to the underwriter. If you show a listing agreement on your current property, you might have some luck… but your lender may still want to treat the 2-4 plex as an investment property. Contact a local lender to get their take on this.

  155. Hi Rhonda,

    My parents are looking into buying me a 2 bedroom condo. In my early years in the military I was poor with my credit so unfortunately I can’t co-sign. We do not mind this property being considered an investment property, but they are asking us to put down way more than we would like. Is there any way around this situation? I will be paying the mortgage it will just be under my parents name. Thank you.

    • Hi Ross, the only program that I’m aware of that would allow for less than 20% down with an investment property would be if you and your parents found a Fannie Mae HomePath property. Fannie Mae HomePath will allow investors to only put 10% down and there’s no mortgage insurance if your parents credit scores are over 660.

      You could always work on improving your credit too :) so that you could have more options available.

  156. Rhonda,
    I am purchasing a Fannie Mae property about 90 miles from my work. I will continue to rent where I work but spend weekends at the house, which is where I ultmately want to live full time. The lender is comfortable with this being a second home – will there be any problem with Fannie Mae, I had to sign an owner occupant certification rider?

    • Hi Ronnie,
      I don’t know if Fannie Mae will have issues or not. I would think that as long as you’re not renting out the home, it would not be considered an investment property.

  157. Hi. My husband and I own a duplex that we have occupied half of since we purchased it three years ago. The space is beginning to feel a bit small for us, so we would like to purchase a single family in the same neighborhood for us to occupy, while renting out the entire duplex. We’re also interested in refinancing the duplex in order to maximize cash flow. I feel really nervous about mortgage fraud, and I certainly don’t intend to commit it. How can we accomplish our goals legally? Thank you.

    • Hi Sunny, since you have lived in the duplex for three years – you should be fine buying your next home as owner occupied. I believe that most deeds of trust have an 12 month period that they expect the borrower to occupy – so you’ve exceeded that! :)

      You should talk to a local mortgage professional about how to deal with refinancing your existing duplex while buying a new home. I would be upfront and disclose your intentions of having the duplex as a rental and not a primary residence. What type of mortgage is currently on the duplex? If it’s an FHA mortgage, you should be able to refinance it as an investment at owner occupied rates.

      Good luck!

  158. Adriana says:

    We are considering financing options for a townhouse or condo for our young adult son who does not qualify for a mortgage on his current income. He is expecting a significant increase in earnings next year when he starts a new job (he has a formal offer with a deferred start date).

    If we go with the kiddie condo option does our son have to be on the mortgage? If, after 12-24 months the property is converted to a rental will him being on the mortgage limit his ability to finance another house on his own? The property we are considering is a very attractive rental prospect as it is adjacent to a major university.

    • Adriana, if your son is currently enrolled in college, you may be able to do Family Opportunity as an “owner occupied” property for your son. He needs to live in the property for at least one year. If you do Family Opportunity, he does not need to be on the mortgage.

      If he is not enrolled in college, and not on the mortgage and you are not occupying the property, it would most likely be considered a rental property – and it wouldn’t matter who lives there (as far a as occupancy is concerned).

      If he is on the mortgage for the condo and decides to rent it out in 12-24 months, he will need to qualify with both mortgage payments (condo and proposed future home payment) and will not get credit for rental income (you need a 2 year history as a landlord before you can get credit for rent). Depending on what type of financing he would obtain for his next mortgage (and mortgage guidelines at that time) he may also need additional reserves at closing (FHA does not require this – conventional does).

      • Adriana says:

        Rhonda, he is no longer in college (he is transitioning back to US work life after a 28 month stint in the Peace Corps.)

        I have seen references on other sites which state that a “recent graduate” can be part of a Kiddie Condo loan. Is this still true? If so, qualifying as owner occupant with our son living in the house with the mortgage in our names alone would be our first choice.

        As an alternative, I have read that FHA mortgages can be transferred which might be an option to avoid exceeding his debt ratios later on. In this case, when he gets ready to move on we could remove him from the loan avoiding the hefty closing costs of a setting up a new mortgage. Is this still do-able?

        • You can co-sign for him with FHA (his name will be on the mortgage).

          It does not sound like this would qualify for “Family Opportunity Mortgage” (son needs to be enrolled in school).

          I’m not sure what you mean by “transferring” the FHA loan – are you referring to FHA loans being assumable?

          You should check with a local lender as they may offer special programs.

  159. Adriana says:

    “I’m not sure what you mean by “transferring” the FHA loan – are you referring to FHA loans being assumable?
    “. YesmI am referring to it being assumable since I read FHA mortgages do not have a Due on Sale clause…

  160. Hello,

    I’m thinking of financing a home for my brother and his fiancee. I do not a home myself, and this property would be nearly 400 miles away. They would essentially be renters, however I’m not anticipating they will be paying much/anything. How would this qualify? And could I deduct interest? Also, if they were to move out a few years later, would that change things?

  161. Ms Porter,
    What a GREAT site this is. Tons of valuable information. Thank you.
    I have a question regarding the definition of a second home.
    I recently sold a townhouse that I owned which was close to work. I work an “alternative” work schedule with my job which is 7 days in a row of work, followed by 7 consecutive days off.
    I was hoping to buy a house up in the mountains, (200miles from work) to use as my legal residence and to spend my days off. When I head into work for the week, I stay with family and contribute (time and money) to their household.
    In my financing application, the lender is telling me that my mountain home will be considered a “second” home since it’s so far from work.
    My question, since I will be spending at least 50% of my time up at the mountain home, is there a way to have it considered my primary residence?

    • Hi Mike, it could be the property type/location that is causing the lender to view the home as a second (or vacation) home. It may also be the distance from your employment that is causing the lender to want to treat this as a second home. I’d get another opinion from a new lender.

  162. Monica says:

    Hello-
    I’m interested in purchasing the home I currently rent from my landlord. The property also has a second seperate residence that is currently rented to another tenant (all on one deed). Would I qualify for an FHA loan?

  163. Monica says:

    Hi-It’s a separate house on a lot.

    • Separate or same lot?

      The biggest issue that I see will be the appraisal. You are going to need 3-5 other similar homes (2 on a lot) that have recently sold within a close radius within about 6 months for sales comps.

  164. juli negron says:

    HI,

    I am trying to get a FHA loan on a primary home.I have a job in Miami, but its so expensive out here that I am looking for a home that is about 132 miles away or a 1 1/2 hour drive. Will this cause a problem with me getting my loan approved? i have lots of co workers that drive over an hour to get to work, so I don’t see why this would be an issue.

  165. Hi Rhonda,

    I currently live with my parents and am looking to purchase the unit downstairs. However they are only putting it up as a investment property because current tenants still have l12 month lease on it. I am ok buying it as investment but plan to live it in once lease is up for its current tenants. But if I decide to sell it eventually (5-10 years from now), will it still be considered investment property (with corresponding capital gain taxes) or will I be able to claim it as an owned property (assuming I live in it for 2-3 more years). I also never owned before…so will I get any first time homeowner benefits if I decide to buy place to own a few years down the road (assume I buy the unit in question as investment now). Much appreciate your advice. Thanks!

  166. Hi Rhonda……I’m trying to buy a house in Houston Texas but I live in Denver Colorado. it’s that possible.the house its my dads but he is willing to take 30% off the value.first time buyer….and I am planning to go live overthere after 3months….I will very much appreciate your advice……THANKS

    • Angel, this will probably be treated as a second home or investment property if you’re not occupying it within 60 days. You should work with a local lender to see how their underwriting will treat this transaction. Good luck!

  167. Hi Rhonda,
    I’m a first-time property buyer and I’m planning to buy a condo. It’s a bank owned property and the condominium is not FHA approved. I plan to stay in the condo for 1 to 2 years before I start looking for a Single Family home. My question is if I’m not able to sell the condo (because its not FHA approved), can I rent the condo and buy a house as my primary residence? If so, will my condo mortgage insurance go up since it will no longer be my primary residence and will now be classified as investment property?

    Thanks.

    • Hi Dhwal,
      You have a couple of things going on here – let me know if I don’t address all of your questions.
      You can rent your condo if you stay in it for at least 12 months (that’s what most deed of trust contract terms are) so the next home you buy (after 12 months) would be primary residence, if you’re occupying it.

      As far as condo mortgage insurance, are you referring to private mortgage insurance or your insurance for your personal belongings?

      Now, when you go to buy your next home… if you’re converting your condo to an investment property, plan on having plenty of savings in reserves for qualifying (retirement funds may count) unless you’re buying using FHA.

      • You should also check with your condo HOA to see if what percentage of rentals they will allow. You may not be able to rent it in the future.

        • Thank u Rhonda for the quick response. The HOA doesn’t have any rental limitation & around 1/2 the property is owned by investors. I’m a new parent so will need a SFH soon. I’m investing in condo because I don’t want to pay rent for next 1-2 yrs. I plan to build 30% equity in condo before I purchase a new house. I plan to apply for FHA loan for SFH purchase. Before I buy the condo, I want to make sure that this won’t affect my mortgage interest when I’m ready to upgrade to a new home as I will be owning 2 properties. In my previous comment, I meant to ask if my condo mortgage interest will go up if I move to new home.
          Thank u.

          • Hi Dhwal,
            Your interest rate should not change on the condo when you go to buy your next home. If lenders discover that someone has committed occupancy fraud, they may call the note due. If you’re living in your condo for 12 months or more, you shouldn’t have any issues.

            As far as being able to sell your condo in the future – you may want to make sure that the occupancy levels remain that of at least FHA standards and that the condo remains HUD approved. Sometimes HOAs seem to miss how important that is for the condo owners.

  168. Hi- can a 5 unit apartment complex on one lot be considered a primary residence if im living in one of the units and renting out the other 4? I read somewhere that a 4-plex can be considered a primary residence but not sure about a 5 unit apartment complex with the intention of renting out the others

    • Hi Shahid,
      I only do 1-4 until properties so I’m not sure how a 5 until property would be treated as far as occupancy. With a 4-plex, a person can occupy one of the units and have the mortgage treated as owner occupied.

  169. Hi…I wanted to buy a house but have a short sale on my record til July 2014 (that will be 3 years). My sister is willing to put the house in her name while I make the payments each month. What type of a loan would we be looking at, or can I be put as a cosign er or will the short sale still affect me

    • Jodie, you won’t be able to co-sign or be on the mortgage at all. This would probably be a “rental” property since you’re going to be making payments and it’s not a vacation property. If your short sale was because of loss of income, you might qualify on your own with FHA’s “Back to Work Program”

  170. Hi Rhonda,

    We are working on refinancing our home. Our plans are to move into it within a few months after we refinance. We want this to be considered our primary residence but the problem is that we both live elsewhere and have jobs in different cities. Basically we have moved for the jobs and want to refinance while we both have employment and have decent incomes. The plan is to have kids soon and I won’t be employed. The town that our home is located in does not have great employment opportunities and my partner will have much lower pay than he does now. Oh, btw, I do go home on my weekends, so I am residing in our house part of the time and the existing loan is for a primary residence. We both receive our mail there, have registered vehicles there, and pay taxes there. We do not own any other homes, but I am paying rent for an apartment near my work. How would an underwriter look at our situation?

    • Heather, I recommend you have this ran by the underwriter. I think you may run into some difficulties. If your employment is not near the home you are considering refinancing – the underwriter may consider it a rental property. Double check with the underwriter – it’s their call.

  171. Jeanne Stanley says:

    Hello Rhonda,
    I live in Colorado, and am the process of purchasing a Town home in Washington State. Plans were to purchase this home as owner occupied.I have already paid for inspection and assessment fees and lender is wanting to close asap. However, I now have an unanticipated situation that will certainly change my prospects of moving into the new home within 60 days of closing. I am legally separated from my husband and own my home in Colorado. The bank was willing to make the loan to me,after reviewing my separation agreement. But, now my husband had had a stroke and is presently confined to a Rehabilitation facility and this may be a long term stay, yet to be determined. Because I am his only family member in Colorado (our children live in Washington State and Delaware, I have been appointed as his medical proxy with responsibilities to make medical decisions for him. This has been a major setback in my plans to move to Washington. I do not wish to lose the home and I am wondering if I can change it to a second residence, and allow my granddaughter and her fiance to live there until I can make the move. Or, can I change it to a investment property and rent it out. I am presently paying 20% down, so would changing to an investment property increase my initial investment. The lender wants to close on the 17th of October. Do I have any options??

    • Hi Jeanne,
      Do you own other property? It seems to me that as long as you’re not renting out this property, you should be able to purchase it as a second home. I hope your husband recovers soon. Take care.

  172. Hello,
    My husband and I purchased our first home (20% down) 2 months ago. It needed work that we wanted to complete before we move in with our two young children. It’s taking us a lot longer to get the work done than we expected. We’re at 60 days of ownership and worried that we need to move in this weekend no matter what the state of the place is to protect ourselves from any repercussions. We are currently renting month to month. What should we do?

    • Cathy, how much longer do you think it will take to complete the work before you can move in?

      • I don’t know how long the work will take, but we plan to move in over the week of Thanksgiving no matter what state the place is in. We are there on weekends doing work and I stop by during the week at least 3 times, either on the way to work or back. We have a lawn service, lights on timers, collect the mail, put out the garbage, and have met both next door neighbors (and given them our contact info). The home does not look vacant or in disrepair.

  173. I’m not sure. I know the mortgage broker did. We brought up the, “what if we can’t move in by 60 days,” and were told to just make sure we keep paying our mortgage and to not ask any questions. We thought we’d be in very close to the 60 days, but now we’re here at 60 days and not in. We could have my husband move in and start living there immediately if we need to. Would that be sufficient, so you think?

    • Cathy, you’re asking me for legal advice, which I cannot provide. You may want to talk to a real estate attorney. You may not have an issue or you may find that the lender randomly selects your loan to do quality control – it’s possible they could do a drive by to make sure you are indeed occupying the home. Again, with that said, I cannot provide legal advice.

  174. My wife and I is helping my daughter to buy a condo. All our names will be on the loan application. It asks whether we all will occupy the unit as primary residence. My daughter will be the primary residence while my wife and I will consider it as a second home. We have our own home with no mortgage. We will live in the condo whenever we visit her. What should we say because there is no box to check for our situation. Will it affect what type of loan we will have. Thanks.

    • Hi Steve, You should discuss this with your loan officer. If your daughter is on the mortgage too, then the lender is probably treating you as a co-signer which is not really a second home (however you should still be getting owner occupied rates).

  175. ed anderson says:

    Looking to buy a cabin with a 2nd home mortgage. We may, a few months later put in a rental program. We will use 2 or 3 months repairing and furnishing before renting. Will still block off and use several weeks a year for personal use. Which mortgage should we apply for ? Thanks

    • Ed, you need to check with your lender and let them know that you intend to use the property as a rental in a few months. In my opinion, this sounds like a rental/investment property.

  176. My husband died in 2000. I sold our primary home at a gain in the same year and moved. My late husband and I had another house which we bought in 1999. I had the house transferred to my name and lived in the house since 2000. Now I want to sell the house and figure I will have a gain about $30,000. Do I have to pay capital gain tax on this house?

  177. Hi Rhonda,
    My Mom lives out of state and owns her own home outright and based on my financial situation has agreed to get a home loan for me b/c I can’t be on the loan. Can it be a 2nd home with less money down and she visit me each year or does it have to be an investment purchase with more down? I”m getting conflicting information from lenders and online?
    John

  178. I have been working out of state for a number of years. When I did my refi they considered my home to be a vacation home. I want to return home and need to know how hard it will be to modify what I have to now be owner occupied full time.

  179. I’m in the process of selling my home. I plan to move, but have not decided where to go, but want to find a job and will need a place to live. My concern is to not have a legal address while in transition. Do you have any thoughts on this or suggestions as how people do transition from one state to another? I’m basically selling my house because of unemployment in my area, and at 55, things are looking beak everywhere.

    • Web, you’re going to need a legal address (street address) so that your credit can be ran and lenders will also want to do a “VOR” (verification of rent). Where will you be living? If it’s with friends or family, you would use their address for the application. Before qualifying for a mortgage, lenders will also want to see an established credit history too. Good luck!

  180. I am currently in the US on a 3-year work visa. I am no longer a resident in my home country, and to all intents and purposes I am resident in the US. Despite this, I have been told by one lender that the house I own in my home country will still be considered my primary residence if I apply for a mortgage in the US, and that rental income from this property will therefore be considered boarder income and will not be included in debt to income ratio calculations. Is this advice accurate? Are there any loans out there where this would not be an issue? Who is it best to speak to? Would the situation be different if I were to get my green card (which I am eligible for by marriage)?

    Many thanks,
    Mike

  181. We have our first home (Tucson, AZ) as a VA loan, we bought the house on Dec.2011. On July 2013 my husband started a new job in a different town (Arizona also but 2.5 hours distance driving).On Nov.2013 we bought a second home close to his job and we moved there. we decide to rent out our first home (in Tucson);we hired a property management and the house in Tucson was rent on January 1st 2014.
    Yesterday we did receive a letter from the Bank that said : “Under the conditions of your government housing finance program for first time homebuyers, your property must be owner occupied. Failure to occupy the property could result in further action from U.S. Bank Home Mortgage to enforce the terms of your loan documents”. The bank also sent us a occupancy Affidavit.
    Could you tell us what we should do????
    Do we have to write a letter to the bank informing that we moved due job changes and we did rent out the house??( we already did change the insurance policy to renters insurance)
    Do we have to refinance the home as an investment or non owner occupied???
    any info will be appreciate

    • I’m not familiar with programs in AZ since I only originate mortgages in WA. In Washington, the down payment assistance programs offered by the WSHFC may call the DPA second mortgage due if the borrower no longer lives in the home. You should probably contact US Bank to let them know if your situation and to see what your options are. I cannot give legal advice and I don’t know all the terms to your mortgage. Good luck!

  182. Hi,

    We moved abroad and we had to rented out our primary residency in MA with a lost, as we have to put money in to keep it.
    Now we moved to California and in order to buy a primary residency here we need to sell our rental/investment home in MA. We have been renting it for 5 years, we lived there for 3,5 years. We dont own anywhere else. Do we have to pay taxes on the sale of the home? and how much?
    Thank you
    B

  183. Hello,

    I’m looking to purchase a home for my mother in Louisiana, which will be an investment property for me in the future (1st home). I currently live in Tx, and plan to purchase my home within 5 years. Any Advice?

    • It looks to me that the key word in your question is “investment”. Please check with a local lender – I only originate mortgages on homes located anywhere in Washington state.

  184. What is the normal down payment on a second home? Our credit is in the “good” range and our debt to income is very good.

    Also, if we are eventually moving to our “second” home (3hrs away) can we say its our primary residence in order to get a lower down payment?

  185. Hi Rhonda,
    I currently rent an apartment where I reside. I have built a townhouse but have never lived in it because it is in a different state. My question is whether or not my townhouse is my principal residence as I have a mortgage on this property and do not own any other property.

  186. Socorro Betancourt says:

    Hi Rhonda,

    My father purchased a duplex as an investment property 3 years ago. He wants me to assume the loan and keep it for myself as an investment property. The bank says the only was i can assume the loan is if it is my vacation home or primary. I have my own home so I do not plan on living in this duplex. My question to you is how can I assume this property?

  187. Lamberto says:

    Hello,
    I’m trying to figure out what for to use when I invest with a partner in a real estate transaction. The property is already purchased by my partner. I am now giving him half the cash to “go in on the investment.” I’m writing a promissory note but in order to have some security, I’d like to have a deed of trust. I was told that a deed of trust is only for a primary residence (which is not the case here). How can I secure the funds I am giving my investment partner. If a deed of trust can be used, where can I find the form? Thank you…

  188. I am selling my house and want to purchase a home out of state but will still work for another 6 months till I retire. My wife is going to move into the new home out of state and I plan on renting an apartment and making trips down for extended weekends. Is this plan possibley

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