Is this considered a second home?

[Jef A.]

I have recently paid off my home and i am now looking for another home. Since i own my first home free and clear when i go to get a mortgage on my next home would they consider that a second home and change the terms on the loan? I am hoping that because i have paid my first home off i can purchase the next home as a normal/traditional home loan with no increased fees or larger down payment required because.

THanks in advance

[Andrew Postell]

@Jef A. If I am understanding you correctly it sounds like you are asking if the bank will allow your next property to be your primary home a secondary home or maybe an investment property.  If your intent is to move into the home full time then there is no question that the new home would be your new primary home.  The term "Secondary Home" works a little differently.  A 2nd home is defined by Fannie Mae as a home that:

• cannot be subject to any agreements that give a management firm control over the
  occupancy of the property
• must be occupied by the borrower for some portion of the year
• is restricted to one-unit dwellings
• must be suitable for year-round occupancy
• the borrower must have exclusive control over the property
• must not be rental property or a timeshare arrangement
• If the lender identifies rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above).

That is verbatum the guide wording on a 2nd home.  But what confuses all of this are bank "overlays".  Overlays are extra rules that a bank will place on top of the guidelines to be more conservative (aka strict) on lending.  So if you find a bank with no overlays, then what is stated above will allow you to own a "2nd home" or your primary home.  If you are hearing different stories than what is above that means that the bank has added their own "overlay". Feel free to ask further questions and if you think this post is helpful for others to know please vote for it.  Thanks!