Quick answer
Fannie Mae treats a home you’ll use part of the year as a second home, which needs at least 10% down (a 90% maximum LTV) and 2 months of payments in reserve. A home you won’t live in is an investment property: at least 15% down and 6 months of reserves — on a $350,000 purchase that is about $67,972 before closing costs. FHA, VA and USDA loans are for homes you live in, so neither qualifies.
Key facts
Who lives there decides the loan
Lenders sort every purchase into one of three occupancy types, and the type sets the down payment, the reserves, the price of the loan and which programs you can use. Fannie Mae’s Selling Guide defines them like this:
| Principal residence | Second home | Investment property | |
|---|---|---|---|
| Who occupies it | You, as your main home | You, for some part of the year | Not you |
| Property | One to four units | One unit, suitable for year-round use | One to four units |
| Control | Yours | Yours exclusively — no rental pool or management firm controlling occupancy | Yours, tenants occupy |
| Rental income to qualify | From other units of a 2–4 unit home | Not counted | Counted at 75% of gross rent |
| Maximum LTV (one unit, purchase) | 97% | 90% | 85% |
| Minimum reserves (automated underwriting) | Set by underwriting | 2 months | 6 months |
A second home also has to be a place you could actually use: the guide rules out timeshares and homes tied to agreements that hand a management company control over who stays there. If a lender sees that you plan to rent a second home occasionally, the loan can still be a second-home loan, but that rent can’t help you qualify.
The basics of each program are in the conventional loans guide. This post looks at what the label does to the numbers.
Cash to close on a $350,000 purchase
Here is the same $350,000 property bought three ways at the minimum down payment, with today’s 7.24% average rate, tax at the national 0.89% ratio, insurance at $4.90 per $1,000 and PMI on each, since every loan here is above 80% of the price. Reserves are months of the full payment that must still be in your accounts after closing.
$350,000 property, 30-year fixed, minimum down payment for each occupancy type
| Occupancy | Down payment | Loan | Monthly payment (PITI + PMI) | Reserves required | Cash needed incl. closing costs (2%–5%) |
|---|---|---|---|---|---|
| Principal residence | 3% ($10,500) | $339,500 | $2,886 | Set by underwriting | $17,500–$28,000 |
| Second home | 10% ($35,000) | $315,000 | $2,707 | $5,413 | $47,500–$58,000 |
| Investment property | 15% ($52,500) | $297,500 | $2,579 | $15,472 | $75,000–$85,500 |
Same rate for all three to keep the comparison simple; in practice second homes and especially investment properties are priced higher.
Moving from a home you’ll live in to a rental adds about $57,472 in down payment and reserves on this price alone. Reserves don’t have to be cash in a checking account — lenders generally accept savings and retirement balances, with rules on how they are counted — but they must be documented.
Why the rate is higher on a rental
Fannie Mae adds loan-level price adjustments to every loan on an investment property and to some second-home loans, on top of the adjustments for credit score and loan-to-value. Lenders pass them on as a higher rate or as points, so a quote for a rental will usually be above the weekly average you see for owner-occupied loans.
The size of the adjustment depends on your credit, down payment and lender, so there is no single figure to quote. What you can work out is the cost of each step: on the $297,500 rental loan above, every half a percentage point of rate adds about $102 a month. Compare offers on the mortgage payment calculator by changing the rate field.
Counting the rent toward your income
For a rental, Fannie Mae counts 75% of the gross monthly rent as income; the rest is an allowance for vacancies and upkeep. The lender then subtracts the property’s full payment (principal, interest, taxes, insurance and any HOA dues). A positive result helps you qualify; a negative one is added to your monthly debts in the debt-to-income ratio.
So the first question is how much rent the property needs to pay for itself on paper. On the example rental, the payment is $2,579 a month, so the rent has to be at least $2,579 ÷ 75% = $3,438 before it stops counting against you.
| Gross monthly rent | Counted (75%) | Monthly payment | Net rental income | Effect on qualifying |
|---|---|---|---|---|
| $2,050 | $1,538 | $2,579 | −$1,041 | Added to your monthly debts |
| $2,600 | $1,950 | $2,579 | −$629 | Added to your monthly debts |
| $3,100 | $2,325 | $2,579 | −$254 | Added to your monthly debts |
| $3,600 | $2,700 | $2,579 | +$121 | Can offset the payment or count as income |
At $2,050 of rent the property adds about $1,041 to your monthly debts, which your other income must carry. Lenders use a signed lease or an appraiser’s rent estimate for the figure, and how they treat the result can depend on your history as a landlord. A second home gets no rental credit at all, so its whole payment counts as debt.
Reserves when you already own property
Buying a second home or a rental while you own other financed properties adds a second reserve requirement: a share of the unpaid balances on those other properties, not counting the property you are buying or your own home.
| Other financed properties you own | Extra reserves |
|---|---|
| 1 to 4 | 2% of their combined balances |
| 5 or 6 | 4% of their combined balances |
| 7 to 10 | 6% of their combined balances |
Say you own your home and two rentals with $400,000 owed on the rentals, and you buy the example property. The lender wants $15,472 for the new rental plus $8,000 for the others — $23,472 in all. Fannie Mae also caps you at 10 financed properties when you buy a second home or investment property, counting your own home.
FHA, VA and USDA: for homes you live in
The government programs exist to help people buy the home they live in, so each one requires owner occupancy:
- FHA insures loans only on your principal residence. You can buy a two- to four-unit building with FHA if you live in one unit — the closest an FHA loan comes to a rental. See the FHA loans guide.
- VA requires you to live in the home you buy with the loan; a vacation home or pure rental doesn’t qualify.
- USDA guaranteed loans require you to move in within 60 days and keep the home as your primary residence.
If you later move and keep the old house as a rental, that is generally allowed once you have genuinely lived there as required. What matters is your honest intent when you sign.
Occupancy fraud: the shortcut to avoid
Lenders can check: they compare the address on your tax returns, driver’s license and mail with the property, and they look at the distance from your main home and whether the second home makes sense as one.
Taxes on a second home vs a rental
The IRS draws its own lines, separate from the lender’s. If you rent out a home you also use, it counts as a residence for the year when your personal use is more than the greater of 14 days or 10% of the days it is rented at a fair price. Rent it for fewer than 15 days and you don’t report the rent at all; rent it more and the expense rules in IRS Tax Topic 415 decide what you can deduct.
Mortgage interest on one second home can be deductible as home mortgage interest if you itemize, within the $750,000 limit on total mortgage debt for your main and second home. On a true rental, interest and other costs are rental expenses instead. The rules have enough exceptions that a tax professional is worth a call before you buy.
When a DSCR loan fits instead
If your tax returns don’t show enough income to carry a rental, or you are buying through an LLC or already own 10 financed properties, a DSCR loan qualifies you on the property’s rent instead of your income. Terms are set by each lender and the rate is usually higher than on a conventional investment loan. For a second home you’ll use yourself, the conventional route is usually the cheaper one — and if extra cash at closing is the question, see points or a bigger down payment.
Frequently asked questions
What is the minimum down payment on a second home?
Fannie Mae allows up to 90% loan-to-value on a second home purchase, so at least 10% down — $35,000 on a $350,000 home. Lenders can ask for more, and PMI applies above 80% loan-to-value.
How much do I need down on an investment property?
At least 15% on a one-unit property bought with a Fannie Mae loan (the maximum LTV is 85%), plus 6 months of the payment in reserve. Two- to four-unit rentals and DSCR loans usually need more.
Can I rent out my second home sometimes?
Occasional renting is possible, but a second home must stay under your exclusive control, can’t be in a rental pool or timeshare, and the rent can’t be used to qualify for the loan. If renting is the main purpose, finance it as an investment property.
Can I use rental income from the new property to qualify?
For an investment property, yes: Fannie Mae counts 75% of the gross rent, minus the property’s payment. On our example the rent must be about $3,438 before the rental stops adding to your debts.
Can I buy a vacation home with an FHA or VA loan?
No. FHA and VA loans require you to live in the home as your residence, and USDA loans require you to move in within 60 days. A second home needs a conventional or other non-government loan.
Is mortgage interest on a second home tax-deductible?
It can be, if you itemize and the home counts as a qualified second home, within the $750,000 limit on mortgage debt across your main and second home. If you rent it out, the IRS personal-use test of 14 days or 10% of rental days decides how it is treated.
How many mortgaged properties can I have?
Fannie Mae allows up to 10 financed properties, including your own home, when you buy a second home or investment property, with extra reserves of 2%–6% of the balances on the others.
Sources
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- US Census Bureau, American Community Survey 2024 1-year — Effective property tax rate (median taxes ÷ median home value) (2024 ACS 1-year)
- Freddie Mac Research — Average homeowners insurance premium per $1,000 of home value (2023 data)
- Freddie Mac My Home — Typical PMI cost, low end; Typical PMI cost, high end (Oct 28, 2026)
- CFPB — Typical closing costs, low end (share of purchase price); Typical closing costs, high end (share of purchase price) (Oct 28, 2026)
- Fannie Mae Eligibility Matrix — Fannie Mae maximum LTV, one-unit principal residence purchase; Fannie Mae maximum LTV, second home purchase; Fannie Mae maximum LTV, one-unit investment property purchase (Apr 1, 2026)
- Fannie Mae Selling Guide B3-4.1-01 — Fannie Mae minimum reserves, second home (DU loans); Fannie Mae minimum reserves: two- to four-unit principal residence, investment property, or cash-out refinance with DTI above 45% (DU loans); Fannie Mae extra reserves with one to four other financed properties (share of their combined unpaid balances) (Aug 7, 2024)
- Fannie Mae Selling Guide B3-3.8-02 — Fannie Mae: share of gross monthly rent counted as net rental income (subject property) (Sep 2, 2026)
- Fannie Mae Selling Guide B2-2-03 — Fannie Mae: most financed properties a borrower may have when buying a second home or investment property (DU) (Nov 5, 2025)
- USDA Rural Development — USDA guaranteed loan: borrower must move in within (FY2026)
- IRS Tax Topic 415 — A home you rent out counts as your residence if personal use exceeds the greater of this many days or 10% of the days rented; A home you rent out counts as your residence if personal use exceeds the greater of 14 days or this share of the days rented; Rent out a home you use as a residence for fewer than this many days and you don’t report the rental income (Sep 24, 2026)
- IRS Publication 936 — Mortgage debt on which interest is deductible (loans after Dec 15, 2017) (Tax year 2025)
- Fannie Mae Selling Guide B2-1.1-01: Occupancy Types
- VA: Purchase loan eligibility
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.