This Article Is About Using Second Home As A Rental And Vacation Home

Using Second Home As A Rental and Vacation Home at the same time is becoming more popular among real estate investors. Using Second Home As A Rental, the investor gets to enjoy the benefits of having a vacation home and get rental income when they are not using occupying it.

There are three types of real estate financing:

• Owner-occupant primary home mortgages
• Second-home financing
• Investment rental property mortgages

Types Of Mortgage Loan Programs

There are different mortgage guidelines on the above three types of financing types.

• Mortgage rates are the lowest on primary home financing
• Second-home financing has slightly higher mortgage rates
• The highest mortgage rates are on investment homes
• This is due to layered risks by lenders
• Owner-occupant homes are considered less risky for lenders followed by second homes and investment homes
• Government loans are for owner-occupant primary homes only
• Conventional loans can be used for second-home and investment property financing
• Down payment requirements on second homes are 10%
• Investment homes require 20% down payment
• The down payment requirement on owner-occupant primary home conventional loans is 3% to 5% down payment
• FHA requires 3.5% down payment
• USDA and VA does not require any down payment and offers 100% financing

The ideology behind this is because when homeowners go through a financial crisis, they are less likely to default on their primary homes than they would on their investment properties.

Using Second Home As A Rental And Vacation Home While Generating Rental Income

Using Second Home As A Rental And Vacation Home while generating rental income is becoming very popular.

• For example, condotels are becoming very popular second homes
• A condotel is a condominium unit in a hotel and/or resort development
• There is a rental office in the condotel complex
• Condotel owners can utilize the condotel unit as many times out of the year they like
• When they are not using it, the condotel HOA will rent the unit out
• The HOA will take anywhere between 30% to 50% of the revenue
• Tourists rent condotel condominiums daily, weekly, or monthly
• This is a perfect example Using Second Home As A Rental And Vacation Home at the same time

Besides conventional loans, Gustan Cho Associates offers alternative niche financing on second homes.

Using Second Home As A Rental Conforming Mortgage Guidelines

The rental income generated can be paid to pay the mortgage on the second home.

• Fannie Mae and Freddie Mac allow second home buyers to rent out the second home and receive rental income
• Real estate investors can purchase a second home with a 10% down payment with a great rate and rent it out when they are not using it
• Using Second Home As A Rental And Vacation Home at the same time, it makes it easier and faster to realize the dream of owning a vacation home a reality

Just not long ago, Fannie Mae and Freddie Mac did not allow rental income on second homes. For vacation-home buyers to use their second homes as a rental, they needed to qualify with an investment loan.

Mortgage Guidelines On Second Home Financing

Second-home financing offers better mortgage rates than investment property mortgages.

• Second-home loans only require a 10% down payment versus a 20% to 30% down payment on investment homes
• To qualify for second-home financing, the homeowner needs to occupy the second-home at least two weeks or longer out of the year
• The rest of the time where the second-home owner does not use their home, they may rent it out
• Many second-home owners rent out their homes as a vacation rental when they are not occupying it
• Proposed future rental income on vacation homes cannot be used as qualified income when qualifying for a second-home mortgage
• Future rental income can be used on investment home mortgages
• Borrowers need to meet all Fannie Mae and/or Freddie Mac Guidelines if they are applying for conventional loans

For more information check out the link on Conventional Mortgage Guidelines.

Benefits Of Purchasing A Vacation Home To Rent And Use It At The Same Time

Second-home mortgage rates are comparable to owner-occupant primary home mortgage rates. One of the greatest benefits of buying a second-home and using it as a dual vacation home and rental at the same time are the following:

• Low down payment requirement of 10% down payment
• Generating rental income to offset housing expenses
• Gaining equity as time passes and the property appreciates
• Taking advantage of today’s low mortgage rates
• Having your own vacation home at your disposal
• Ability to purchase single-family homes, PUD, condos, manufactured homes, condotels, and 2 to 4 unit multi-family homes
• Gifted funds are allowed but 5% of the funds needs to be the buyer’s own funds
• Sellers concessions can cover most and/or all of the closing costs

More and more people are buying second homes and using them as rentals when they are not using it.

Qualifying For A Second-Home Mortgage With A Lender With No Overlays

Buying a second home and having the ability to rent it out during times when owners are not using it is a great way of building equity. Gustan Cho Associates are experts in second home financing. For more information about this article or to qualify for a mortgage with a five-star mortgage company licensed in multiple states with no lender overlays on government and conventional loans, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.