December 24, 2018
Investing in a winter vacation home is tempting for many, especially in snow-bound states. Do borrowers have the option of purchasing a vacation home with an FHA mortgage?
A look at FHA loan rules quickly reveals that one of the requirements for FHA loan approval is that the home be used as the primary residence; occupancy is a condition of loan approval for an FHA single family forward mortgage loan.
But does this mean that borrowers can never use an FHA mortgage to buy a property that will become a winter vacation home?
Not exactly. Borrowers who purchase a home with an FHA mortgage, use it as their primary residence, and refinance it with a conventional mortgage would be technically free (unless the conventional loan agreement states otherwise) to use the property as a winter home.
The same goes for those who purchase a home with a co-borrower who will use the home as the primary residence; there is nothing that says the other borrowers cannot use the property as an occasional occupancy property as long as one borrower obligated on the mortgage note uses the home as the full-time residence.
The Non-Occupying Co-Borrower
In these cases, those who don’t live in the home full-time are known as non-occupying co-borrowers; your down payment requirements may vary depending on the nature of the relationship of the borrowers and other factors.
Ask your lender how the home loan is affected when the non-occupying co-borrower is a family member or when the number of living units is greater than a single-unit property. In some cases a higher down payment is required, in others the maximum financing is available for those who financially qualify.
In these cases, those who don’t live in the home full-time are known as non-occupying co-borrowers; your down payment requirements may vary depending on the nature of the relationship of the borrowers and other factors. Ask your lender how the home loan is affected when the non-occupying co-borrower is a family member or when the number of living units is greater than a single-unit property.
This advice may not be exactly the things that you want to hear being in the market for a vacation home (summer or winter) but they are ways to meet the requirements of an FHA loan with its’ lower down payment and more flexible credit rules.
Borrowers should know that most government-backed home loan programs will require occupancy as a condition of loan approval; understanding this in advance will save time and money in the house hunting process for those who may not be looking for primary residence but do want to purchase a home.
It’s also important to remember that even when conventional lenders are part of your house hunting plans, each lender will have different requirements and you should know whether occupancy is one of those before committing to a particular financial institution.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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