10% Down Second Home/STR Loan Not Dead/Debunking bad info

[Jeff Chisum]

Revisiting the subject of financing for vacation home/vacation rentals/STR's.

10% down is still an option without having to pay points.  

There are lenders doing loans outside of Fannie and Freddie.  Significance there is that Fannie and Freddie decided in March of 2022 that they were going to basically eliminate the 10% down option by adding high enough fees that lenders couldn't pass a fees test unless they were going to originate the loan at a loss.  With that said... there are unicorns out there where the rates are competitive without the points added.  

Revisiting the requirements of the second home occupancy loan and debunking misinformation out there.

1.  Your intention is that you will occupy the property at some point during that first years.  You will see 14 days floating around.  That's the tax lane and IRS rules.  Has nothing to do with fulfilling the mortgage requirements.  Bottom line is you can rent out on a short term basis and you don't get into a legally binding agreement during the first year where you lose the ability to occupy the property when you so choose.

2.  There is no mileage requirement.  The occupancy as a second home has to make sense if it's within a reasonable close proximity to where you live.

3.  You can have a property manager.  You just can't sign agreement where the property manager controls when you can and can't use the property.

4. You can hold title in an LLC. After clarification of the policy you can transfer title into an LLC after closing. If it is questioned you just need to be prepared to show that you haven't changed occupancy intent as a second home. If it was found that you took on a tenant after closing (within the first year) and now you are looking transfer title then yes the due on sale clause could be executed or worse. Be prepared to transfer title back into your individual name before refinancing the loan.