Posted by Dana Velkers on 11/10/09 12:29am
Msg #310456

? About 1-4 Family Rider/2nd Home Rider

I had a closing this evening that was on a vacation home. The rider that was attached was a 1-4 family, not a Second home. In my 4+ years in this business I do not remember signing a 1-4 Family Rider rather than a 2nd home rider when it is clearly the borrower's vacation home. Can someone please explin why? I would greatly appreciate it.

Reply by Dana Velkers on 11/10/09 12:43am
Msg #310458

Sorry explain.

Reply by jba/fl on 11/10/09 2:09am
Msg #310460

A 1-4 Family Rider usually means it is a multi-unit property, more than 1 unit, such as a duplex, tri-plex, or four-plex. It can be written as 2-4 Unit Family Rider, or 1-4 Family Rider, or a variation of some sort.

http://reiblog.thereiteam.com/ has a good article about this rider. Lengthy, comprehensive. Many times one will also see an Assignment of Rents, which authorizes the transfer of rents and revenues to the lender.

Reply by PAW on 11/10/09 8:48am
Msg #310483

From my title company experience in Florida, the "1-4" rider is typically used for income producing, noo (non-owner occupied) property (also requiring the NOO Rider) and the "second home" rider is used for owner-occupied, non-income producing property. A Florida Second Home Rider typically has a "no rent" clause prohibiting any rental of the property at any time during the life of the mortgage.

Reply by jba/fl on 11/10/09 10:14am
Msg #310506

Since the poster is in WA I felt a generic description was enough.

One of my pet peeves here on NR is that people ask a question pertaining to one state and most answers are specific to the respondent's state, which is really of no value to the questioner sometimes, although it may be of value to others in that specific state.

Reply by JanetK_CA on 11/10/09 2:38pm
Msg #310539

I think you make a very valid point. But it's a double edged sword, because there are always many more people reading the responses than the original poster - and who knows how they will be interpreted. In other words, do all the other readers *get* that this is specific to the state of the poster? I'm not so sure. And then there's the original questioner, as you pointed out.

I think it can be useful for us to read about how things vary from state to state sometimes, but I totally agree with you when it comes to messages where people post what comes across as a definitive answer which may be true for the state of the responder, but might not be true for the state of the original poster - or for most others!

It would do us all good to keep in mind that just because something is true in one place doesn't mean it's correct someplace else.

Reply by ReneeK_MI on 11/10/09 4:46am
Msg #310461

1-4 Family Rider = any residential property of 1 to 4 units that is rented out (i.e. investment property). If the vacation home is also rented for more weeks than is allowed (there's a margin allowed, don't remember how many weeks that is), or alternatively - if the borrower doesn't live in the vacation home for the required minimum number of weeks, it's going to fall under this category.

The consequential differences between the two may be in the availability of loan products, the interest rate, and the tax implications - but, I'm neither an L.O. or a tax accountant.

Found this:
A second home is generally considered a property that is not rented out more than two weeks per year and which is located in an area which makes sense, given the borrower's current principal residence. A second home would not be, for example, 20 minutes down the road from the borrower's primary home.

An investment property is any 1-4 unit residential dwelling which is neither a principal residence nor a qualified second home. Whether or not the property is earning money for the owner is not relevant in this determination

Reply by Dana Velkers on 11/10/09 9:24am
Msg #310493

Thank you all for your help and information. :-) You have definitely answered my questions as to why it was used in this particular transaction. I hope everyone has a great month. :-)