Primary Residence or Second Home?

Guest

I currently live in LA and am renting a townhouse here which is about 2 miles from my office. I've co-owned a condo in Orange County (about 45 miles from my office) for 28 years. It's always been rented out full-time. I'm investigating purchasing a condo in Palm Springs (about 110 miles from my office) while the market is depressed and would use it part-time until I retire in a few years. I'm wondering 1) whether I could claim it as my primary residence or whether it would be considered a second home because of its distance and limited use; and 2) whether I might qualify as a first-time home buyer since I purchased my condo so long ago and have never lived in it, and sold my last house over 7 years ago. I've been told FHA probably won't lend on it because it would be considered a second home, and regardless, the down payment would have to be at least 20% or I'd get hit with mortgage insurance. Finally, I've been a full-time employee for a bit less than 2 years, and have been told that because I was self-employed prior to that, I would not be eligible for an FHA loan until I reach my 2 year anniversary. The purchase price of the condo will probably be fairly low (in the ball park of $125,000). Thanks for any ideas.

jenkin7 · Posted: Tue Nov 03, 2009 11:34 pm Post subject:

Hi jrhinla,

I believe the new condo you want to purchase will not be considered as your primary residence. You will have to occupy the property for a considerable amount time in a year in order for it to qualify as your primary home. The distance between your home and your office is also a factor that can disqualify the home as your principal residence. Thus, I think your home will be considered as a second home.

In order to qualify as a first time home buyer, you must not have owned a principal residence in the last 3 years. You have not used your current condo as a principal residence. So, you technically qualify as a first time buyer. But the condo you are going to purchase has to be used as your principal residence to avail the tax credit. Since you are not going to occupy the property, you will not qualify for the tax credit.

savior70 · Posted: Wed Nov 04, 2009 4:44 am Post subject:

Hi,

What you have been told about FHA mortgages is true. You cannot qualify for an FHA-insured loan, unless the property is used as a primary place of residence. But whether you go for an FHA loan or a conventional loan, you will have to pay for mortgage insurance, given your down payment amount is less than 20% of the purchase price. For FHA loans you also need to show a stable employment history for at least the past 2 years.

All times are GMT - 7 Hours

Page 1 of 1