Can I use FHA financing to acquire a second home?

Secondary residence refers to a dwelling that a borrower occupies, in addition to their principal residence, but less than a majority of the calendar year. A secondary residence does not include a vacation home.

Secondary residences are only permitted with written approval from the Jurisdictional Homeownership Center (HOC) after a determination that:

  •       the borrower has no other secondary residence;
  •       the secondary residence will not be a vacation home or be otherwise used primarily for recreational purposes;
  •       the commuting distance to the borrower’s workplace creates an undue hardship on the borrower and there is no affordable rental housing meeting the borrower’s needs within 100 miles of the borrower’s workplace; and
  •       the maximum mortgage amount is 85 percent of the lesser of the appraised value or sales price.

The lender must demonstrate the lack of affordable rental housing, and include:

  •       a satisfactory explanation of the need for a secondary residence and the lack of available rental housing; and
  •       written evidence from local real estate professionals who verify a lack of acceptable housing in the area.

For additional information see Handbook 4000.1 II.A.1.b.iii.(B) available at http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh