More than one second home in the same location?

Question

I have a second home that I use as a STR in the Outer Banks, NC. Can I buy another second home in the Outer Banks, NC for 10% down to use as a STR? Or would I have to buy it as an investment property with 20-25% down?

Kevin Luttrell · Answer

As a mortgage broker I can tell you this is underwriter discretion. Some underwriters may not care or ask, while others may scrutinize the situation. That's why you're getting different answers/experiences in this post.

Fannie Mae's definition for second home properties includes "must be occupied by the borrower for some portion of the year". An underwriter more heavily scrutinizing the situation might think it's unlikely you'll be vacationing to 2 different homes in the same area each year.

Generally speaking, I have not seen underwriters look too deep into occupancy concerns related to second home vs investment property since Fannie/Freddie installed new LLPAs a couple years ago that make the pricing for each aligned in most cases. There is now essentially no benefit to obtaining a second home loan over an investment property loan, except for the ability to do 10% down rather than 15% (minimum for investment properties).

This info is all related to Conventional mortgage financing. If you work with a local community bank or credit union or some lender that doesn't sell to Fannie/Freddie in the secondary market, their guidelines and pricing could be different on this matter.

Jeff Langley · Answer

Try starting with the lender who gave you the original 2nd loan, that’s how i started and then started making calls. There is always a way, you just need to find it.

Drago Stanimirovic · Answer

Yes, you can potentially buy another second home in the Outer Banks, NC with 10% down, even if you plan to use it as a short-term rental (STR). However, there are a few key conditions to consider:

1. Second Home Loan Criteria:

• The property needs to qualify as a second      home for the lender. Typically, this means it must be a vacation home      located a certain distance from your primary residence (usually 50-100      miles away).
• You can rent it out on a short-term      basis, but lenders may require that it’s primarily for personal use (e.g.,      you stay there for part of the year).
• Some lenders have specific      guidelines on how often you can rent the property out and may ask for      documentation proving that it’s for your personal use for part of the      year.

2. Investment Property:

• If the lender determines that the      property is being purchased solely as an investment property, then the      down payment will usually be 20-25%.
• This happens if the property won’t      be used for personal stays and is strictly for generating rental income.

3. Lender Flexibility:

• Every lender has different rules,      so it's important to communicate your intended use of the property      upfront. Some lenders may allow more leniency on STR usage while still      qualifying the property as a second home.

If you want help navigating lenders that are STR-friendly or to explore financing options, I’d be happy to assist. Let me know!

Best,
Drago

Sarah Kensinger · Answer

I also heard you can by two second homes with the 10% down loan in the same area, so long as the homes are different in some way. Like one is waterfront, the other is not. One is in the country, one is in town, etc.

Garrett Brown · Answer

Welcome to the forums @Anthony Silva!  I think it actually matters more of the distance from your primary, but I would definitely talk to an investor-friendly lender to see their thoughts. https://www.biggerpockets.com/business/finder/lenders

Jeff Langley · Answer

Not from my understanding. I spoke to lenders in Colorado and in Idaho, both said it can be done. I even had two lenders lined up in Idaho, and switched to one that got me 6.3%.  I think you need to find the correct lender.

Anthony Silva · Answer

Thank you for the info. That was what I thought, but I just wanted to be sure. I am also planning down the road to expand to different areas, such as mountain house or a different coastal area.

Tanner Lewis · Answer

The main thing here is that the property should be "available to stay in" for 180+ days a year. I suggest doing this with a DSCR loan if you intend to use it as an investment property.

You can check the Freddie guidelines here:  https://guide.freddiemac.com/app/guide/section/4201.15

Anthony Silva · Answer

Great, thank you for the info!

More than one second home in the same location?

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