Buying a multifamily residence as a second home/vacation property?

Question

It's the long weekend, so my lender is OOO. :)

If I buy a multifamily home, and keep one unit vacant (while renting out the others) would I be in breach of my loan agreement? I understand that you have to live in the home for at least 2 weeks out of the year.

Thanks!

Jason Wray · Answer

John,

If your Banker is MIA on the weekends you need a new one.  First you cannot buy a Multi-family as a Vacation home its only for SFR - single family, condo's, townhomes and they require 10% down.  Any multifamily 2-4 unit can be purchased under FHA with 3.5%, VA (zero down), Conventional 20%-25% down primary for primary 2-4 units depending on # of units.

There is also a Portfolio program that allows for 15% down on any 2-4 unit Multifamily investment rentals. If you buy as a "Primary Home" you need to occupy for at least (6) months and you would need to refinance to transition loan into conventional primary to investment and move out.  You need (6) months of title seasoning to refinance unless you pay all cash.  At the 6th month mark you can elect to do a "rate & term" refinance if the LTV is 85% or less.

You can use the same title company "Master policy" to save a good chunk of change on the refinance and ask for an AVM to avoid an appraisal (if no cash out).  On the refinance you do not pay points if you use a FDIC bank or credit union so you avoid the BS fee's.  So another words avoid most lenders/brokers by using same bank who did previous loan.

Feel free to message me if you need more clarity.

Caroline Gerardo · Answer

@Dee Shiozaki have a nice day.

Dee Shiozaki · Answer

Lol no this is mostly cap a second home needs to be occupied 14 days or 10% of the total days rented.  You are confusing the primary residence requirement with he 2nd hime requirements which is that you need to live there the majority of the year, change your address etc. If there was no difference in the primary and second residence requirement what would be the point of even have a different loan program just have primary.  Use common sense your brain is your friend.

Caroline Gerardo · Answer

Information above not exactly available for a conventional Fannie/Freddie/FHA loan.

You use multi family as 2-4 units. Break out single family/condo; then 2 units then 3-4 units all have different rules. 1-2 units is far easier to get approved verses 3-4 which have extra conditions to ensure that the whole project cash flows with market rents minus the one owner occupied unit. 3-4 units you need much larger down payment - as in no 3.5% down

Second home programs are for one unit types: SFR/condo/townhouse.

Owner occupied means you live there and your insurance policy matches. When you rent it out the insurance won't cover for possible loss. When you change the insurance to add loss of rents and tenant perils the notice goes to the lender and servicer. If you did this showing all units as rentals they can call the loan. Will they? I would rather sleep without worry.

No there is no two week rule. You sign a contract that you owner occupy for one year on second home/ or any owner occupied product. Don't sign if you plan to do other things in weeks.

Generally not a good plan to be forced to refinance in six months. The property probably might not have enough equity to meet the much larger percent of equity needed for non owner. Non owner rates will be MUCH higher and you might not qualify. Also today there are no lenders offering non owner conventional loans without points. You will be paying huge costs twice in a year and that probably will kill your bottom line. Lets say each loan flat fees are $5000 - double that, could be more for loans over $300000

No lender can guarantee that you can later use a AVM for a refinance conventional. If you are buying in a resort or rural area it's likely an AVM will not be available and be too low in valuation to work. Fannie and Freddie are playing with accepting automated valuations to save consumers costs but a computer generated appraisal might be much lower than you want as it won't account for view, upgrades, and improvements.

Look for a plan that meets your needs and fits what you really intend to execute.

Robin Simon · Answer

Second Home Loans are only for SFR (no multi-units) and its not 2 weeks out of the year, its at least half of the first year (180 days) "live in it" or at least not rent it

Buying a multifamily residence as a second home/vacation property?

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