The FHA loans are intended for a buyer's primary residence. The FHA does not allow the FHA loan to be used for a vacation or investment homes (although, years ago, the FHA permitted investor loans - not now).
There are some exceptions to the one-loan policy. You may qualify for an FHA loan on a second home if you meet one of the FHA hardship exemptions.
FHA Second Home Loan Eligibility Requirements
If a Borrower is:
-is moving or has moved for work-related reasons; and
-If building or establishing a new principal residence in a location more than 100 miles from the borrower's present principal residence, the borrower may be eligible for another FHA-insured mortgage without having to sell an existing property covered by an FHA-insured mortgage.
If the borrower returns to the original area, he or she is not required to stay in the original house and may apply for a new FHA-insured mortgage on a new principal residence if the move meets the two requirements stated above.
Increase in family size
A Borrower may be qualified for another home with an FHA-insured mortgage provided he or she produces acceptable proof of the following:
-the borrower's legal dependents have increased, and the property no longer meets family requirements; and
-Based on the outstanding mortgage balance and a recent residential assessment, the Loan-to-Value (LTV) ratio on the current principal residence is equal to or less than 75 percent, or is paid down to that level.
Vacating a jointly-owned Property
If a borrower is leaving (with no intention of returning) the principal residence that will be occupied by an existing co-borrower, the borrower may be eligible for another FHA-insured mortgage.
A non-occupying co-borrower on an existing FHA-insured mortgage may be eligible for another FHA-insured mortgage on a new property to be their own Principal Residence.
Borrowers who already have an FHA-insured mortgage on their primary residence may qualify as non-occupying co-borrowers on other FHA-insured mortgages.
SOURCE: Handbook 4000.1 Last Revised: 12/30/2016 (page 141)
Second home loans are only allowed with written permission from the local FHA office, and only after it has been determined that:
- The borrower has no other secondary home.
- The second house will not be used as a vacation home or for recreational purposes.
- The Borrower's commute to work is unduly difficult, and there is no affordable rental property meeting the Borrower's needs within 100 miles of the Borrower's job; and
- The maximum loan amount is 85% of the assessed value or the sales price, whichever is less.
- This corresponds to a 15% down payment.
Buying a second home with a conventional loan
The Federal National Mortgage Association, known as Fannie Mae, offers a second home loan for qualified buyers. The second home loan mortgage program is provided by approved lenders. The minimum down payment is 10% with an acceptable credit score. The seller is permitted to pay up to 6% of the borrower's closing costs with a 10% down payment. Read more