Buying A Second Home With Conventional Mortgage Loans

This article is about Buying A Second Home With Conventional Mortgage Loans

One of the best decisions my wife Pam and I ever made was purchasing our little Lake Michigan getaway. About fifteen years ago Pam, my mother-in-law, and father-in-law came to me with a proposal about buying a second home. They found a property on Lake Michigan with its own private beach that was a divorce sale and we could buy it under market. My first reaction was absolutely not. We had a very comfortable first home. I didn’t want to take on the additional monthly expense. They were relentless. They finally wore me down, we put in a contract and it was accepted.

Financing Options In Buying A Second Home

Since FHA does not offer a vacation home option we had to look at a conventional loan. The minimum down payment Fannie May allows for a vacation home is 10%. We both put down 10% and eliminated the mortgage insurance.

We decided to split the payment down the middle. Each takes half of the interest deduction on our income taxes. Having a construction background I would be responsible for any updates (kitchens, baths, flooring, etc.). They would take care of the general maintenance (lawn and yard work, snow removal, etc). Those lines have since become blurred. We all just pitch in to keep the place nice.

Distance In Buying A Second Home

Being in Michigan and only two hours away we use it all year. We invite family and friends up all year round In the summer we enjoy the beach and in the winter there’s downhill and cross country skiing. Some of the best family memories we have were made there. The kids are fifteen and eleven. They don’t remember a time when we couldn’t just take off for a weekend and spend time together as a family

Every year I invite my buddies up for several weekends of beer and the sport du jour. It’s great to get together with old friends that you rarely see except on these short weekend trips. Pam invites her friends up for wine tasting, blueberry, apple, and peach picking, shopping, and hitting the nightspots.

While the monthly expense is still not on my top ten list, if I had it to do it all over again, I’d do it without hesitation. The trade-off in wonderful memories and fun times with family and friends has been more than worth it.

Affordability In Buying A Second Home

Which means distance when buying a second home

Lastly, make sure you can comfortably afford it. Don’t buy too much. Keep the payment where it can fit easily into the monthly budget. Sitting on the beautiful beach at the beautiful beach home wondering how you’re going to make the house payment will make owning a second home fun for everyone but you. There are expenses associated with buying a second home. Keeping a second home such as monthly housing payments, maintenance, and general upkeep can be stressful. The rewards and pride of owning a second home override the rewards of being a second homeowner.

Requirements To Qualify For Second Home Financing

Buying a second home can be extremely rewarding. Second Home Financing is normally conventional and/or non-QM loan programs. FHA Loans, VA Loans, and USDA Loans only allow for primary owner-occupied homes only.  Conventional loans have second home financing and investment home financing programs available. A 10% down payment is required for second home mortgage loans and a minimum credit score of 620 is required. The maximum debt to income ratio permitted is 50% which includes the borrower’s primary home and the proposed second home mortgage loan.

Second-home buyers can qualify for non-QM and alternative loan programs on second homes. Non-QM loans have lenient mortgage guidelines and are negotiable with lending requirements. Not all non-QM lenders have the same lending requirements on non-QM second-home loans. Since non-QM lenders are portfolio lenders, each non-QM wholesale lender has its own lending requirements. Gustan Cho Associates has dozens of lending requirements with non-QM wholesale lenders.

About The Author

What are the requirements to qualify for funding from a second home?

This Article On Buying A Second Home With Conventional Mortgage Loans Was Written By Alex Carlucci of Gustan Cho Associates.

Alexander Thomas Carlucci is a contributing writer for Gustan Cho Associates Mortgage News and the Senior Vice President of Mortgage Banking for GCA Mortgage Group. Gustan Cho Associates is a national mortgage lender with a national reputation of having no overlays on government and conforming loans. Gustan Cho Associates is headquartered in Lombard, Illinois, and is licensed in multiple states. Alex Carlucci is an expert on all government loan programs and conforming loans. Alexander Thomas Carlucci is also an expert on non-QM loans and bank statement loans for self-employed borrowers. Alex has a national reputation of being able to close mortgage loans other lenders cannot. Over 75% of Alexander Carlucci’s borrowers are folks who either gotten a last-minute mortgage denial or are stressing over the mortgage process with their current lender.

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