Vacation Home Loan Guidelines

[Michael LemMon]

I am exploring the different types of loan options I have and had a question about 2nd home/vacation home loans...

I understand all the financial aspects but as far as the other guidelines go... I know you need to occupy the house for at least 14 days a year and no long term renters are allowed. But what if down the road you want to turn it into a long term rental property and not use it as a vacation home - Is that allowed? How long do you have to stay within the 14 days and short term rental guidelines before you can do as you please with the property? 

I am looking for any advice or experience with the matter ( I know it'll depend on the lender, but just a general rule of thumb would be nice). For example, with a FHA loan you have to occupy for a year before you can do whatever you want with it, what is the similar guideline for vacation home loans?

Thanks!

[Zach Wain]

@Michael LemMon - Each lender will have their own overlays and different interpretation of the Fannie Mae/Freddie Mac guidelines (for conventional loans).  But the majority of our lenders only require that a vacation/2nd home must have some personal use, they do not define the amount of days.  You are allowed to have short term rentals in your 2nd home, as long as you use the property for personal use as well.  It is a hazy definition, but it works quite well for most scenarios.

On the Occupancy certificate that everyone signs at closing, it states your intended occupancy is for 1 year.  After 1 year of the appropriate use, you can convert the home to a rental property, primary home, whatever you want at that time.  Nice and easy!

2nd homes require a min downpayment of 10% down, they are eligible for appraisal waivers, and they get almost the same exact rate as a primary home does.  There might be some changes coming down the road to 2nd home rates/pricing, but we need to see how some of the new Fannie Mae/lender rules play out before we know if there is any impact to pricing.

Good luck!