If you want to purchase a second home, allowing it to sit unoccupied while you’re living life in your primary residence seems like a missed opportunity to earn income. But if you plan to rent out your second home, does that change or jeopardize your ability to qualify for a mortgage?

At MortgageDepot, we understand that there is a difference between being a property investor and simply wanting to earn a little extra cash while your second home sits idle. That’s why we allow mortgages on a second home that you plan to rent for a portion of the year without crossing into investment property territory.

Second Homes vs. Investment Properties

The lines become understandably blurry between second homes and investment properties at the mortgage desk. Here is a quick explanation of the difference between the two:

  • Second home: A second home is a property that you purchase in addition to your primary residence that you intend to occupy for part of the year.
  • Investment property: An investment property is a property that you purchase to rent out for income. It can be a single-unit or a multi-family property.

Second-Home Mortgage Requirements

We understand the ins and outs of Fannie Mae and Freddie Mac’s requirements for second-home purchases. Here’s what you need to know, especially if you plan to rent out your second home:

  • Under Fannie Mae and Freddie Mac guidelines, only single-unit homes can qualify as second homes.
  • Under Fannie Mae, the second home must be suitable for year-round occupancy. The property must have a permanent heating source to be eligible.
  • Freddie Mac also requires that the second home be habitable year-round unless seasonal occupancy limitations exist. If this is true, we need to get at least one real estate comp to prove the property’s marketability.
  • The borrower must have exclusive control over the property. Timeshares or similar arrangements are not permitted.
  • Under Freddie Mac, the property must be available for the borrower’s personal use for more than half of the year. Fannie Mae’s requirements for this aren’t as clear-cut.
  • Rental income generated from the home is acceptable, but it cannot be used to qualify for the second-home mortgage.
  • Freddie Mac requires that the second home be located in an area commonly considered a secondary residence, such as a beach community or mountain resort town. Fannie Mae’s location requirements aren’t as specific as Freddie Mac’s.

Contact Us Today!

Do you dream of having a second home in your favorite destination? We can help! Contact us today to find a mortgage product that will make a second home an attainable goal!

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