Does FHA Allow For Secondary Residences?

Does FHA Allow For Secondary Residences?  Eric Boucher wrote a blog in November of last year titled "Are Second Homes Considered Owner-Occupied or Investor-Owned?"  Eric's blog was on how Second Homes can impact a Condo Complexes ability to qualify for FHA Condo Certification, but it also got me thinking how many people are aware FHA does have a special provisions for Second Homes.

A Second Home or Secondary Residence as FHA refers to them, is a property a Homeowner will occupy for a part of the year, in addition to the property they consider their primary residence.  In essence the Homeowner really has two primary residences.

FHA is only a Primary Residence Loan Product, and not generally thought of as a possible loan product for a Secondary Residence.  But under special circumstances FHA will allow for one Secondary Residence.  The special circumstances is if the Borrower can demonstrate a hardship for the following:

• The Borrower/Family is unable to find affordable rental housing which meets their needs. The Borrower will need to provide documentation to support his/her claim that there is a lack of affordable rental housing in the area.
  
• The Primary Residence is not within reasonable commuting distance from work.

A Secondary Residence must also meet the following:

• The Loan Amount on the Secondary Residence, will not be higher than 85% Loan-To-Value (LTV) or the lesser of the appraised value or sales price of the property.
• The property MUST NOT be a vacation home or be used primarily for recreational purposes.
• The Borrower requires a Secondary Residence because of:
  • Seasonal employment, or
  • Employment relocation
    

NOTE: 

Approval for a special exception for a Secondary Residence cannot be granted by a Lender's Direct Endorsed Underwriter (DE).  An exception can only be granted by the Lender submitting a request on behalf of the Borrower to the Local FHA Office in writing.

Does FHA Allow For Secondary Residences?  Yes they do, as long as the Borrower is able to meet the above requirements.