Buying a second home

Bravo if you’ve already purchased a home. This page helps outline some of the pros and cons to consider when buying a second home, and provides important information to help you understand what you’re getting into. Purchasing a second home is different from purchasing a first home, so read on to learn what to expect with the mortgage process.

Ever vacationed on the Jersey shore or in the mountains of Colorado? Maybe you stayed in a vacation rental and dreamed of owning a home like that one day. You could visit whenever you want or use it as a rental property. These are two common reasons to buy a second home. Below, we list a few more pros and cons to consider.

• A personal getaway. Owning a second home in a place you enjoy vacationing is a win-win. Rather than searching for a hotel or rental each time you visit, you have a go-to spot that makes getting away easy. Maybe you spend quality time with family at your ski cabin during the winter holidays, or a summer vacation involves some time at your beach house.
• Vacation rental income. While a second home must be available for personal use and enjoyment, short-term rental income may be a great option. You could use this income to pay off the mortgage.
• A place for your kids to live while attending college. Room and board can be expensive on or off-campus. Rather than paying rent, you could purchase a home in your child’s college town and pay the mortgage each month. When they graduate, you could continue to rent the home to college students in the area or sell the property.
• Diversifying your investments. Housing prices generally appreciate, so owning a second property can be an asset that will become more valuable over time.
• Retirement home. If you’re looking to retire in a different neighborhood than where you currently live, a second home can be a head start in the community. Get to know the area and make some friends before you make a permanent move.

• Property taxes and insurance. These can add up quickly and require a substantial part of your annual budget. Don’t forget to consider these fees.
• Home security. Remember to consider who will watch over the home when you’re not there. This might require investing in security cameras or hiring people to check in on the home.
• Maintenance and property management. Someone needs to be responsible for making repairs and renting the home if it’s a rental. Whether it’s you or someone you hire, this could require extra time or money.

This is where we come in! Mortgage qualifications are stricter for purchasing a second home, but we can help every step of the way. Our loan officers can guide you through the process and answer all your questions.

You won’t be able to use a government-backed mortgage program like an FHA or VA loan unless you’re able to assume the seller’s loan. Rather than taking advantage of these low- or no-down payment options, you’ll likely need to be ready with 10% or more of the down payment depending on the purchase price you’re looking at. If your second home classifies as an investment property, then you may have an even higher down payment and higher interest rate. Our mortgage payment calculator can help you figure out what you’ll be able to afford.

Debt-to-income ratio is a crucial factor we review when helping customers looking to finance a second home. Ideally, your income is significantly greater than the debt payments you’re making since you will have to qualify with both your primary residence and the new second home payments. Before applying, you can use our pre-qualification calculator to determine affordability.

These may seem like extra hoops to jump through, but it’s very feasible to purchase a second home if you’re in good financial standing. You can also go in on the purchase with another person and share the costs of purchasing a second home.

Answering this question comes down to your specific circumstances and finances. It might seem like a good idea, but it’s important to consider all the options and weigh the pros versus the cons. We help with these kinds of decisions every day, and we can help guide you through this process and help you achieve your goals. If you’d like to talk with a loan officer, connect with us here.