Thinking about purchasing a vacation home at your favorite family getaway? Residential Home Mortgage Corporation has helped many borrowers, like you, find just the right finance solution. Our loan experts are here to walk you through the process and make that dream a reality.
Understanding How A Vacation Home Is Treated For Mortgage Purposes
You’ve found the right property. You now need to find the right mortgage. Let’s take a look and decide how you are going to use the home.
There are three categories for home mortgages. Depending on the specifics of your vacation home, it will be treated as:
A primary residence (you live there for the majority of the year)
A second home (a residence occupied by you or your family for a portion of the year. You cannot rent it out.)
An investment property (you rent out your vacation home (i.e. VRBO, HomeAway)
Our RHMC team will help you understand this distinction and make your vacation home a reality.
Credit Criteria for your Second Home
Mortgage requirements on a second home and/or investment property are generally stricter than that on your primary home. A few key things to take into consideration:
Conventional loans are the most common loans for second homes and Loan-To-Value (LTVs) vary from that on your primary home. The LTV is a ratio specifying how much you have invested versus how much you have borrowed. For example, on your first home you could have purchased with as little as 3% down, which is a 97% LTV. The math: 97% + the 3% down = 100% of the home price.
Second homes require a minimum of 5- 10% down, or an LTV of 90-95%
Investment properties require a minimum of 20-25% down, or an LTV of 75-80%
FICO credit score of 620+ is required. The better your credit score, the better your interest rate.
These are the general guidelines, but don’t worry because your RHMC sales associate will be able to provide all the options available to you. They’ll discuss the possibility of using rental income to qualify for your loan, help you determine your optimal debt-to-income ratios – and how much vacation home you can afford.
The Finance Process | What You Can Expect
If you’re in the market for a second home, you’ve worked hard to get to this point. The process of purchasing a vacation home is an exciting time. You take care of finding your dream destination and our RHMC experienced sales team, will walk you through the rest.
Build a budget – Work with an RHMC associate to determine how much you can afford. Think about the mortgage, taxes, insurance, maintenance and potential rental income.
Loan requirements – Most lenders will require a credit score 620+, as well as a minimum down payment of 10-20%, and a DTI (debt to income) ratio not exceeding 50%.
Find the right lender – Buying a home is a big commitment and finding the right lender is key. We are committed to work with you. We’ll issue a pre-commitment letter to help you get your dream vacation home, and then find the best mortgage solution for your specific situation.
Once you’ve completed these three key steps, it’s time to start shopping for that vacation home!
Ready to Mortgage Smartly™?
At RHMC, we understand you. Whether you are purchasing a vacation home or an investment property, we have a wide array of loan options tailored specifically for you. We’ll take that guess work out and provide you with great rates and great service.
Fill out a low rate quote request today to discuss purchasing a vacation home with one of our RHMC experts.
Great Rates. Great Service. Mortgage Smartly™.