All Forum Posts by: Jeff Chisum

Clarification. When using the Fannie/Freddie/Federal Home Loan Bank second home occupancy loan and you transfer title within the first year to an LLC that the borrower is majority owner of it will not trigger the due on sale clause as long as you can attest that it will continue to be a second home.

Thank you for the feedback and question! My clients get a homeowners policy with a STR rider or go with a policy through a company like Proper Insurance that specializes in STR. To try and set up a landlord policy prior to closing or even shortly after closing would not be recommended. After the first year you are released from the occupancy commitment and you could place the property under a landlord policy without problems. You would just want to make sure the carrier is ok with short term rentals.

@Michael Baum I double checked with a CPA that specializes in working with STR investors and he said there was no distance/mileage requirement from your primary.

I’m going to bet that most originators are not going to know the policy. As stated previously make sure you have a Fannie/Freddie or Federal Home Loan Bank loan…which if you are going with a 10% down second home occupancy loan there is a 95% chance. If you are shopping lenders that would be a question to ask. Most people undervalue working with an expert or just don’t know the importance. They just want to shop rate.

@Jon Martin people do get tripped up by this. By listing and accepting bookings year round for the first year doesn’t take away your ability to occupy the property when you want to. Technically it’s available for you to occupy 365 days. After the first year you are released from any restrictions.

@Andrew Steffens agree with all. We have physician clients that work in the suburbs that need to buy something close to their hospital in the case of bad weather or they need to be close to the hospital. When not there they rent it out on a short term basis.

@Michael Smythe

Yeah it’s more the amenities, attractions or near a family member. 50 miles plus isn’t a magic number, old policy

@Jon Martin there is no limit. You just can’t lose the ability to occupy when you want to. No long term lease agreement within the first year. You will read in the policy that it has to be available to occupy for at least half the year. That’s where understanding Airbnb and VRBO, etc… are not facilitating a legal lease agreement so you as the owner have the right to cancel. I don’t advise because you potentially could get kicked off of a platform but as the owner you are not losing occupancy control because of a legally binding agreement.

@John Underwood I haven’t heard of losing title insurance as being an issue

You would want to confirm your loan has been sold to Fannie, Freddie or Federal Home Loan Bank before transferring. If so you are allowed. Better yet before the loan is originated make sure it will be sold to one of the three.

@Erica Calella you don’t need to own a primary residence in order to utilize the 10% down second home occupancy loan