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A second home can be a fantastic investment, whether you use it as a source of revenue or a place to take the family on vacation. However, financing another property is often a complicated process, which catches some buyers by surprise when looking for a vacation or rental home. If you’re planning on buying more real estate, below are a few things you should know about securing a mortgage.

Getting a Loan on a Second Home

Financing Options Vary Depending on Usage

Before approving amortgage mortgage, the lender will want to know how you intend to use the property. In general, financing a vacation home requires similar paperwork to purchasing your first residence, but getting a loan for an investment property is more complicated. You’ll need to get an appraisal and a schedule of projected rent, which tells the lender how much you’ll earn on the rental home.

You’ll Need to Make a Down Payment

The Federal Housing Administration and other organizations offer programs that allow homebuyers to purchase a primary residence with down payments as low as 3.5%. However, vacation homes and investment programs don’t qualify for these programs, so lenders will expect you to put at least 10% down if the property is for personal use or 20% if you’re going to rent it out.

Lending Standards May Be Higher

Most lenders have more stringent requirements for vacation homes, including a better credit score and more income to qualify. The minimum credit score required for a loan depends on several factors, including the size of the down payment and your debt-to-income ratio. Lending criteria for investment properties are often stricter, so you may want to build up your credit score in advance.

 

Whether you’re dreaming of buying a vacation home or becoming a real estate investor, loanDepot - Deuane Woodard, Loan Consultant has the expertise and experience to help. With over 30 years of experience serving buyers throughout North Richland Hills, TX, this mortgage specialist will open doors and guide you through the process. To apply for a mortgage, visit his website or call (817) 875-6043. Follow him on Twitter for more tips and updates.

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