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How to buy a second homePosted by
Lake season is here! If you are considering purchasing a vacation property, now is a great time. No matter what type of vacation property – lakeshore, rural or urban — you’ll follow the same basic steps when it comes to financing a second home. Here are some things to consider as you purchase a second property.
Setting a budget:
When financing a second home purchase, it’s essential to get in touch with a mortgage consultant BEFORE you begin your property search.
Together with your mortgage consultant, we will help you determine a budget that takes into account, maximum mortgage payment, annual homeowner’s insurance policy, and taxes.
While these additional expenses are not factored into your mortgage scenario, other costs to keep in mind are travel costs – to and from the property, regular maintenance & repairs, utilities, furnishings, and household items.
Financing a second home:
While some people can afford to pay cash for a vacation home, financing makes more sense for a majority of future second homeowners. Here are two options to consider:
Financing a second home is different than purchasing a primary residence. FHA home loans are not an option since they can only be used to buy a primary residence. That leaves a conventional loan, which you have to qualify for on top of any mortgage debt on your primary home.
Typically, you will need to make a down payment of at least 10 percent, meet credit standards and debt-to-income requirements, and provide documents for income and asset verification.
Home values are on the rise across the country. Because of this, many homeowners have built substantial equity in their primary residence in just the past few years. Cash-out refinancing can be an excellent way to liquidate your home equity and then use it to purchase a vacation home.
Rental vs. Vacation Home
For some, owning a vacation home may sound like an unattainable dream. But, with the rise of services like Airbnb, it is now easier than ever to receive occasional rental income.
If you do plan to rent the property out, know that financing is different for rental homes and vacation properties. Qualifying is more straightforward when purchasing a property as a second home.
Finding your dream
The market for lake homes is heating up, and new properties are being added to the market daily. If you are not already working with an agent, we would be happy to recommend some REALTORS that specialize in lakes country. They will take the time to help you find your perfect home away from home.
Once you have found a property, your First Class Mortgage consultant will help you determine the best way for you to purchase it.