Investment Property & Vacation Home Loans

Real estate is a useful tool for building wealth, or a great way to secure that perfect beach house for your days off. Whatever your goal is, financing a second home or an investment property is a completely different ballgame than financing your primary residence.

The Terminology:

• Primary Residence: The home where you live most of the year. This property gets the best interest rates and federal tax advantages.
• Vacation/Second Home: A property you live in part-time (like a summer cabin or a condo in a city you travel to for work). It is not your home base.
• Investment Property: Real estate purchased purely to generate income, such as flipping a house or renting it out to tenants.

Why Financing is Different:

Lenders view second homes and investment properties as higher risk. If finances get tight, borrowers are far more likely to default on a rental property than the house they actually sleep in. Because of this added risk, government-backed loans (like FHA, VA, and USDA) are generally off the table.

What to Expect with a Conventional Loan:

• Higher Down Payments: Expect to put down 15% to 30% of the purchase price, rather than the 3% to 5% typical of a primary residence.
• Stricter Requirements: You will need an excellent credit score, strong assets, and proof you can easily cover the new mortgage.
• Cash Reserves: Lenders often want to see that you have enough cash in the bank to cover at least six months of mortgage payments for both your primary home and your new property.
• Rental Income Rules: Keep in mind that your future rental income usually cannot be used to lower your Debt-to-Income (DTI) ratio during the application process.

Mortgage Programs For Investment and Vacation Properties

• 30-Year Loan: The traditional 30-year loan comes with competitive interest rates and manageable monthly payments. Depending on the property’s purpose, you may be able to get owner-occupied funding with reduced rates.
• 15-Year Loan: If you want to own your property sooner, this program cuts your payment period in half and typically offers lower interest rates.
• Other Loan Periods: We can also help you secure a 10, 20, or 25-year loan, or customize a term between 7 and 30 years to fit your repayment goals.

If you have the credit and the down payment ready, investing in real estate can pay off tremendously. Let’s get you pre-qualified so you can jump on the right property as soon as it hits the market.