Whether you’re looking for a vacation getaway or an investment property, getting approved for a second home loan is a smart first step. At Sammamish Mortgage, we make the approval process simple and transparent, helping you understand your financing options and what you qualify for. With a clear budget and pre-approval in hand, you can search for your second home with confidence and peace of mind.
Thinking about buying a second home? Unlike a primary residence, an owner occupies a second home on a part-time basis only. While interest rates on a second home are similar to rates on a primary residence, lending requirements such as down payment, asset reserves and credit score can be more restrictive.
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First and foremost, a second home cannot be used as a rental property. If you either plan on renting the property, or have rented it in the past, it would fall into the classification of an investment property.
The second criterion is one of proximity to your primary residence. Generally speaking, a second home must be at least 50 miles away. Exceptions to the 50-mile rule are on a case-by-case basis, and are up to the discretion of the lender.
A house in a city and a house on the beach, even if they are less than 50 miles apart, could qualify, but you’ll need to verify that before committing to buying a second home.
Lenders typically require insurance on a second as part of the loan agreement to mitigate risk from things like accidents, natural disasters, or liability claims. Having coverage also helps protect your financial investment from unexpected events and costly risks.
You will need to prove a history of both reliable and continual income sources. A debt-to-income ratio below 45% will also be required. For second home jumbo financing, the ratio must be even lower.
Expect to show the ability to make at least 6 months’ worth of payments for both your primary residence and second home. Funds must be held in a liquid account, such as a checking or savings account. Funds can also be held in an investment account, but you will only be given credit for a percentage of the amount, due to the fluctuation in value.
Most lenders like to see credit scores above 700, but some will go as low as 620. A positive payment history is also a must, as recent delinquencies on your second home mortgage payments are usually a deal killer. Bankruptcies, short sales, foreclosures are also major red flags for second home financing.
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Conventional loans for a second home require a 10% minimum down payment for a second home, while jumbo loans require a minimum of 20% or more. This differs from the purchase of a primary residence, in which case your down payment could be as low as 3% as long as you paid private mortgage insurance (PMI).
Down payments for a second home can come from standard sources such as bank or investment accounts. They can, however, also come from a more creative source, such as a home equity line of credit. In this scenario, at least part of the down payment for your second home would come from the equity of your primary home.
For a better idea about different second home down payment scenarios, we invite you to utilize our interest rate quote. It’s free to use and requires no personal information.
Get StartedA second home is a property you intend to live in part-time for personal use, and not a full-time rental or investment property.
Yes, most buyers use conventional loans, jumbo loans, or use their home equity from their primary residence to finance the purchase of a second home.
Typically yes, rates can be slightly higher for second home mortgages than for primary residences due to increased risk for the lender.
Most lenders require 10% to 20% down, though even more may be required.
A score of 620 or higher is typically required, though higher scores are recommended and may help you qualify for better rates.
Yes, to qualify as a second home, it usually must be at least 50 miles away from your primary residence.
Second homes are for personal use, while investment properties are rented out and have stricter loan requirements.
Most lenders require a DTI under 43%; the lower, the better.
Yes, lenders often require 2 to 6 months of mortgage payments in reserves to qualify.
Our loan officers are ready and waiting to help you apply for your home loan.
For more information about second home mortgages, or to find out how Sammamish Mortgage can help you, feel free to contact us today. As a Mortgage Company, we currently lend in all of Washington, Oregon, Idaho, Colorado & California.
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