Non-Occupying Co-Borrower vs Second Home

Great question. In my experience with lenders, second homes are cut and dry. The days of gray area financing no longer exists. A second home must geographically make sense ( at least 50 miles away from the primary residence). You also need to be on title as a general rule for refinance, and the fact that your parents live in the second home has no bearing whether it qualifies for a 2nd home so long as they are not renting or being charged for living there, and you qualify with the second house payment. The distance requirement may change from lender to lender but anything less than 50 miles will no doubt lead to frustrating results. Hope this helps - Armando Nunez MLO over 20 years

Generally speaking, non-occupying co-borrower loans do NOT come at a higher rate... Second home loans also do not come at a higher rate. Getting a second home loan is generally not an issue unless it doesn't make logical sense. For example, I am in St Paul, MN. You wouldn't have a second home in Minneapolis, MN., but you could easily have a condo in California. Some people say there is a mileage distance rule, but that is not true... It just has to make logical sense. www.JoeMetzler.com

If both of your parents are over 62 years of age, they may qualify for a reverse mortgage, which would reduce their financial outlay to onlytaxes and interest, and you would not have to pay anything at this time. Then when they no longer are living there, you can either get amortgage on the home (providing you are the heir) to have as second home (assuming as noted below) that it is at least 50 miles away. Otherwise, it will be considered an investment property and you would need between 20-30% down, depending on program -- but if yourparents are able to use the reverse mortgage program, that would give you, most likely, several years to work on building the down payment.

As a direct lender, we see situations like this all the time. There are certainly requirements that must be met in order to determine whether this would qualify as a second home for you. First of all, do you own another property? If you don't, this can't be a second home. Next, is your parents property in an area that would be considered a vacation destination (ie: near the beach, mountains, etc.). If the answer is no to both of those questions, trying to finance the property as a second home is going to be nearly impossible. The simplest option would be to do the loan as an owner occupied refinance with your parents as the primary borrower (I understand they can't qualify by themselves) and you as the non-occupant co-borrower. FHA allows for this type of situation and the rates would be as an owner-occupied loan. Another option would be to consider an FHA reverse mortgage. Your parents as long as they meet the age and equity requirements would qualify as there is no credit or income criteria for those types of loans. Some food for thought. If I can be of further assistance, please let me know. John Beman 888-779-6500 x 7315

We can do this as a 2nd home, so long as your parents stay on the loan. If you have any further questons, please feel free to give me a call at 858.663.0472. We are also local to you and have an office in downtown San Diego if you would like to come in and discuss.