Buying a Second Home – Your Top Considerations

Securing Financing When Buying a Second Home

Purchasing a second home is a big purchase step regardless of where you are in life. It’s a time to fulfill your house dreams on a larger scale and it can present a new set of challenges. Conquering those challenges for you by delivering uniquely tailored mortgage solutions, great customer service and a stress free loan experience is what the Moreira Team knows best.

Your licensed mortgage advisor has a wide variety of loan products from multiple lenders to address your new home needs. For example:

10% down 2nd home purchase program available
Credit scores as low as 660

Can You Afford Buying a Second Home?

Even if your financially well off, you’ll still need to crunch the numbers to ensure you can afford buying a second home. Remember: it’s not just the purchase price that needs to be reasonable. Plan on the same ongoing expenses with this house as you have with your main residence: taxes and insurance maybe be less if you are in a rural area and they maybe even higher in an urban area or resort town.

For second homes, not just the purchase price needs to be affordable. You have to factor in the additional expenses involved with owning a home that you don’t live in full-time, such as hiring a property manager and someone to keep the place maintained.

If you can’t charge enough in rent to cover the monthly expenses, you’ll need a cash reserve to help out. Financial experts recommend that you have at least one year of mortgage payments available for a second home as a safety net.

If you’re ready to purchase a second home, we’re ready to help get you your keys.

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Getting Qualified when Buying a Second Home

Once you’ve run the numbers and its looks like you can afford to take on a second home you’ll need to go through the same qualifications as your primary home.

The requirements to qualify a for second home or vacation property are a bit stiffer than your first mortgage because the lender has to take on added risk.The standards for purchasing a vacation property versus an investment property are different so keep that in mind before speaking with your trusted mortgage advisor.

The benefits of choosing to buy a vacation home, rather than an investment property, include:

Guidelines for purchasing vacation homes are more lenient than those for investment properties.
Down payment requirements are generally more relaxed.
Interest rates are typically better.

Here are some of the ways getting a second mortgage loan can be more difficult than securing the first:

Larger Down Payment (Maybe)
You will still need to come up with a larger down payment than your current residence – well that’s not always the case. In most cases with excellent credit you can put down as little as 10% but this can increase to 20% depending on your credit score.

Improved Credit Score
Lenders require a bit higher credit score for loans on second homes. This will vary by lender, but the general rule is that you’ll need your credit score to be in the 660+ range. Afraid that your credit score isn’t in this range? Your Mortgage Advisor will shop around for the second loan because mortgage loan guidelines vary between lenders.

Better Debt-to-Income Ratio
Lenders point out that the underwriter for the lender will put the debt-to-income ratios of those looking for second mortgages under closer scrutiny than they would for borrowers on their first mortgage. You may not be accepted for a second mortgage if your debt-to-income ratio is above 43% of your monthly pre-tax income!

Is your debt-to-income ratio above 43%? Here’s are some pro tips to lower it:

Pay down consumer debts including credit cards
Avoid using credit and pay with cash until you secure the second loan
Look for ways to up your income (if you can’t lower your debts, this is your only option!)

You can also circumvent the higher debt-to-income ratio requirement by:

Looking at a less expensive home

Buying a Second Property as a Vacation Property or Investment

Stop dreaming about buying a vacation home or an investment property, it’s easier to qualify than you think. We can help you determine what you can reasonably afford when researching how to buy a second home, and provide a home financing plan that will help you realize the perfect hideaway for your family.

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