The rebounding real estate market means the outlook is good for vacation property purchases, too. By and large, lenders are treating second homes much like primary residence purchases. However, you will have to deal with a few special considerations, so it’s advisable to work with a residential mortgage specialist to get the best deals.
Lenders often require a larger down payment for a second property, though there are a few who expect just 20 percent. The majority of lenders want to see 35 – 50% in cash down. The good news is you’re allowed to access these funds through a home equity loan on your main residence. Just keep in mind that the repayment will factor in to your debt-to-income ratio. Whether you’re buying your first home, your tenth investment property, or a vacation condo in a high-demand location, your costs will be capped at 36% of your income.
As with the purchase of investment property, lenders expect to see higher credit scores when approving loans for vacation homes. The baseline is 680, with traditional rates requiring buyers to have scores of 740 or higher. Midland Mortgage Corporation can help you tailor your credit score to available vacation home financing, as well as compare alternatives. Many vacation homes range from $1 million and $10 million, meaning there’s a wider range of options available for financing, including jumbo loans.
Sales of vacation properties are surging. While many buyers are still paying cash, the low interest rates available are encouraging more to jump on the mortgage bandwagon. In the past, second homes were considered a serious risk, and by default, loan programs covering vacation properties charged excessive rates. That’s no longer true, and now it is easier than ever for people to put their money into a second property.
Already own a vacation home (or two)? Refinancing and benefit from these new low interest rates with help from Midland Mortgage Corporation.