Financing Second Homes And Investment Properties
This article is about Financing Second Homes And Investment Properties
Advice On Financing Second Homes:
A good percentage of homeowners own second homes or vacation homes.
- Financing second homes can be done with conventional loans and require 10% down payment
- FHA, USDA, VA Loans are for owner-occupied mortgage loans only
- Second-home loans are not allowed with government loans
- Mortgage Rates on second homes are very competitive
- Actually, second home mortgage rates are similar to mortgage rates on primary home financing
- FHA insured loans do not qualify for second homes
- FHA insured homes are for owner-occupied residential homes only
- There are certain mortgage restrictions in second home loans
Requirements On Second Home Mortgages
Homeowners who own a principal home and want to purchase a second home, there are two types of mortgage loan programs.
- One is financing for second homes
- The other type of financing program is financing for an investment home
- The main reason borrowers want second homes financing versus investment homes financing is that the mortgage rates on second homes financing is lower than investment homes
Down payment requirements for second homes is 10% down payment versus the 20% down payment for investment home financing.
Mortgage Lending Guidelines On Second Homes
To qualify for second home mortgage rates, most lenders need to be convinced that it is a second home purchase and not investment property.
- The mortgage loan underwriter wants to see some distance between a primary residence and second home
- They usually want to see a 60-mile distance from primary home and second home
- The second home is in a different state, that would even be better to convince the mortgage underwriter
Other factors include whether the second home is a waterfront property:
- Or whether it is in a tourist area like near Disney World in Orlando, Florida
If second homes are waterfront properties or are in tourist areas like Orlando, Florida, then the 100 miles away distance is normally waived.
Underwriters Letter Of Explanation Requirement For Financing Second Homes
I get many calls from potential mortgage loan borrowers who are interested in purchasing second homes for various reasons.
- Some want a second home so they can be closer to their kids and grand kids
- Others want a second home because they want to be closer to their jobs
Mortgage underwriters may want a letter of explanation if the second home is a similar property as the owner occupied home:
- Also if the distance of the second home is close by the primary home
Homebuyers shopping for second or investment homes who have questions, please contact us at 1-262-716-8151 or text us for a faster response. Or email us at [email protected]