Second Home

With proper credit scores and the ability to repay both the home you live in and this new home…rates and guidelines are the primarily the same as they are for your normal conventional property for purchase and rate/term refinances. In other words, no additional fees or charges on your second home loan like there are on Investment property loans. If you depend on any rent to repay the loan, you won’t be able to use those funds to qualify. If you must use them, you are now in an Investment Loan situation.

The only major stipulation is that this “second” home will have to be in a vacation area such as the beach, a mountain retreat, log cabin, place on the lake, etc. If you are able to “swing” this investment, you will be earning equity on two properties vs. one and so on. This is another great strategy to become “Mortgage Rich.” Equity in your existing property can be used as leverage to buy that vacation home as well. Once you have purchased this home, you may turn it into an investment vehicle if you wish and start renting for income while you aren’t using it. An example would be to buy a beach home and rent it during the times you aren’t there to maximize the income from the unit, all the while being able to stay there rent free as your “tenants” are paying the mortgage. Usually a year is required of ownership first and you must consult a tax advisor for all tax questions as the interest could be deductible depending on your situation. If you will be using the rental income to create more opportunities with more properties in the future, remember, an underwriter will need proof of income from this property in order to use for qualifying. This means a copy of your latest tax return will be required for approval to prove you have claimed this income from the rental. If you haven’t claimed it, you can’t use it.

Documentation:

  • 2 year employment history
  • 2 year residence history
  • No lates on mortgages in last 12-24 months, other credit in good shape as well.
  • 10% down payment on purchases (some 0% down are available for much higher rates)
  • Proof of down payment funds (i.e. recent bank statements)
  • Credit scores above 620
  • Debt ratios normally not to exceed 46%
  • Mortgage insurance required above 80% LTV
  • Proper ID as defined by the Patriot Act

*Make sure you consult a mortgage professional and all of your questions are answered before taking the plunge.