A borrower owns a beachfront condo that she purchased as a second home two years ago. She has since listed it on a short-term rental platform and it generates income 60% of the year. She now wants to refinance. How should the MLO most accurately classify this property for the refinance application?

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Accepted Answer

Investment property, because the primary use is now rental income generation and it no longer meets second home criteria Property classification is based on current intended use, not the original purpose at purchase. Fannie Mae's second home definition requires that the borrower occupy the property for some portion of the year AND that it not be subject to a rental pool arrangement or primarily used as a rental. A property rented 60% of the year via a short-term rental platform has shifted its primary use to income generation and no longer qualifies as a second home under standard GSE guidelines. The MLO must classify it as an investment property for the refinance, which affects rates, LTV limits, reserve requirements, and how rental income is calculated. Misclassifying it as a second home would constitute occupancy fraud. 'Hybrid classification' is not a recognized Fannie Mae or Freddie Mac category.

A borrower owns a beachfront condo that she purchased as a second home two years ago. She has since listed it on a short-term rental platform and it generates income 60% of the year. She now wants to refinance. How should the MLO most accurately classify this property for the refinance application?

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