Vacation Home Loans & Mortgages for Investment Properties
Are you considering buying a second home or an income property and need advice on loans for a vacation house? Interest rates remain near record lows and lending guidelines have been eased for 2nd home loans and mortgages for investment properties. Why not maximize homeownership by investing in an income property that could increase your cash flow and future wealth?
Affordable Financing Programs for Vacation Homes
Lower interest rates drove countless Americans into the housing market over the last few years, confident that a good interest rate was waiting. While many of those who decided to seek out their first home were very successful, there is another category of buyer that has gone largely unnoticed – vacation home buyers.
Even as interest rates start to climb and first-time buyer enthusiasm is dulled, vacation home sales are healthy: Vacation home sales rose almost 30% in 2013 thanks to growth in home values and investments for high-earning households.
This isn't quite a record – vacation homes hit their peak nearly ten years ago. However, if trends continue, it might indicate another structural shift in the housing market. Buyers with limited savings and credit made a strong showing in the first half of the housing recovery, but high net-worth households stand to gain as luxury market drivers gain momentum.
Finding Lenders That Offer Mortgages for 2nd Home Buying and Investment Properties
The engines of the housing recovery so far have been programs like FHA home loans and VA mortgages. However, most of these programs stipulate the property bought must serve as a primary residence. It cannot be an "income property" or vacation home. In fact, 38% of vacation home buyers pay cash. What about mortgage options? Second home loan programs are rare, and there are no fixed down payment requirements for vacation homes. Most buyers who choose to buy a second home put down a substantial amount on a down payment, usually around 30%. For second loans, buyers will generally need to get a private loan serviced by a major bank. If you are still paying a mortgage on your first home, a very important factor in the decision will be your "debt to income ratio." For Second Homes, Lenders Insist On A Debt Level Lower Than 36% Of Your Income.
Getting a home loan to buy an income property can be tricky, so it is imperative to seek financing from companies that take risks on investment and income producing properties. You may have to consider a private money lenders that offers non-conforming products such as investment home loans.
Before deciding on a second home loan, it is a good idea to reduce your debt as much as you can. You can do this by paying off the mortgage on your first home, paying off revolving accounts like credit cards, or refinancing your existing commitments. If you have held the mortgage on your first home for some time, or even finished paying it off, it may be possible for you to use the equity in your home to pay for part or all of your second home. If the second property is meant for rental, this can be a sound investment strategy!
If possible, look for a short-term loan for your second home. It may be possible for you to pay a short-term loan if you have completely paid off your first home and are going to be generating significant income from the second one. This will reduce your expenses over time. Because a second home is considered a luxury, loan programs for these properties generally don't come with many benefits. Remember, though: Once you have one income property with significant equity, it becomes much easier to invest in additional properties in the future! Learn how to buy a second home.
According to BankRate, there are more international people buying homes in the United States than ever before. This is encouraging for people investing in rental properties and income producing real estate.