How to Get Financing to Purchase a Second or Vacation Home

The process for financing a second home or vacation home can be a little different from purchasing a primary residence. For starters, not all conventional home loans allow second homes/vacation homes, and those that do may have different requirements and underwriting guidelines.

If you’re in the market for a second home, here’s a quick look at some of the mortgage options that may be available to you.

Conventional Home Loans

With a conventional mortgage, your lender agrees to loan you the money to purchase a home under certain conditions. When it comes to getting a conventional loan to finance a secondary residence or vacation home, guidelines may be more strict. After all, lenders typically view second homes as higher-risk investments; therefore, they may require higher interest rates, higher minimum credit scores, higher down payments or additional loan fees.

Regardless of what type of second home mortgage or vacation home mortgage you get, your lender is required by law to review the full cost of the loan, including any fees and interest before you close. For more information, look into the Truth In Lending Act.

Asset Qualifier

With the Asset Qualifier loan program, the borrower is able to use his or her assets to qualify, instead of having to provide documentation or verification of income. This loan option may be ideal for borrowers with substantial assets, but who lack consistent, documentable income.

Bank Statement Loans

Bank Statement Loans allow borrowers to use their bank statements on deposit accounts to qualify for home financing. For example, Luxury Mortgage’s Bank Statement Qualifier Loan lets borrowers apply using the balances of their business or personal bank accounts rather than W-2 or tax information to verify their income. This can be a great solution for self-employed borrowers, investors, or anyone without traditional, consistent income.

1099 Only

As the name implies, the 1099 Only Loan program allows borrowers to use 1099 income documentation to qualify for home financing. People who rely on 1099 income for the bulk of their earnings sometimes find it difficult to qualify for traditional mortgages for a primary residence, let alone a second home. With the 1099 Only program, qualified borrowers can finance or refinance a primary residence or a second home/vacation home.

Jumbo Mortgages

Jumbo mortgages are designed specifically for properties that are high-value and those that are priced beyond the conforming loan limits. Conventional mortgages must adhere to loan limits for the area in which the property is located. As of this writing, the current conforming loan limit is $510,400 for most one-unit properties in the United States. If you were to finance a home for more than that amount, you would likely need a Jumbo Mortgage.

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We’re here to help you find the best home loan solution for your scenario. Whether you’re ready to get a free rate quote, or you have a few questions before getting started, let us know! We’re ready to assist you on your journey to homeownership.