Second Home Mortgage


Second Home Mortgage

For those seeking second home mortgage, there are minimum second home mortgage guidelines.  Second home financing needs to be conventional loans.  FHA loans are for primary owner occupied homes only.  There are requirements for a second home purchase to be classified as a second home. The deal needs to make sense.  If your primary residence and second home are comparable properties in size and it is close to each other, then the second home purchase cannot qualify for second home financing. Mortgage lenders do not want to finance a second home buyer for a second home financing if the property is not a second home but an investment home.  There are differences between second home financing and investment home financing.

Differences Between Second Home Mortgage And Investment Home Mortgage

Second home mortgage requires a 10% down payment and the mortgage rates are comparable to first home mortgage rates.  Investment home financing requires a minimum of 15% down payment but most mortgage lenders will require 20% down payment.  Mortgage rates for investment home financing is higher than second home financing.  Normally, investment home financing has 050% higher in mortgage rates than second home financing.  To qualify for second home financing, the second home needs to be quite a distance away from the home buyer’s primary residence.  As mentioned earlier, you cannot qualify for second home financing if the second property is less than 60 miles from your primary residence.

Case Scenario Where Second Home Mortgage Needs To Convert To Investment Home Mortgage

You cannot use potential rental income with second home mortgage. If a second home buyer has high debt to income ratios and cannot qualify for a second home financing and the property is an actual second home, the home buyer might have to do an investment home financing so the second home buyer can use the potential rental income.  You can use 75% of the potential investment home rental income to qualify towards your debt to income ratios on investment home purchases.  For example, if the home you are purchasing has a market rent of $1,000 per month, you can use 75% of the $1,000 towards income when calculating your debt to income ratios on your mortgage application.  By putting down 20% down payment and getting a mortgage loan as an investment home loan, you can now add the rental income in calculating your debt to income ratios.  This is a way where you can qualify for a second home if you have higher debt to income ratios where if you were to just buy it as a second home you would not have qualified.

By Gustan Cho

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