Whether you are buying a second home for vacations or as an investment, you will need a mortgage unless you are able to pay cash for your new property. Although getting a mortgage for a second home is similar to getting a mortgage for your first home, you will face more restrictions, particularly when lenders calculate home payment requirements.
Not all mortgage programs will allow you to use your loan to purchase a second home. For example, VA loans and loans insured by the Federal Housing Administration must be secured by the borrower’s principal residence, so they aren’t appropriate for second home purchases in most cases. Conventional loans, however, can be used to purchase a second home as long as you meet the lender’s requirements.
For many borrowers, one of the most difficult parts of qualifying for a mortgage on a second home is meeting the lender’s debt-to-income ratio requirements. Your debt-to-income ratio is the ratio of your revolving monthly debts to your gross monthly income. Because this ratio will most likely include two mortgage payments when you buy a second home, staying within the lender’s acceptable limits is more challenging than it would be for a loan on a primary residence. That being said, if you don’t owe any money on your first home, or if your revolving monthly debts are relatively low when compared to your income, you may not have as much trouble.
If you are interested in learning more about securing a mortgage for a second home, consulting a mortgage loan originator is the best way to start. A loan originator can help you review your mortgage options, calculate home payment limits for your second home and close the transaction with as little trouble as possible. Contact Starboard Financial to get started!
For more information about mortgage expenses or to check the latest loan rates, contact Starboard Financial. We have offices in both Arizona and Illinois, as well as loan officers nationwide who are ready to assist you.