If you are thinking about purchasing a second home, you may have quite a few questions about what you can expect regarding the application process and loan rates and terms. Below are answers to some frequently asked questions about second home mortgages.
Q: What are the costs associated with buying a second home?
A: Purchasing a second home involves the same basic costs as purchasing a primary residence. Along with the cost of the mortgage itself and interest, you need to consider closing costs, mortgage fees, homeowners insurance, private mortgage insurance (PMI), ongoing utilities costs, property taxes, homeowner’s association fees, and so forth.
Q: What is the difference between a rental investment property mortgage and a second home mortgage?
A: Whether you need to apply for a rental investment property mortgage, or a second home mortgage depends on how you plan to use the property and what you need to do in order to afford it in the first place.
If you can buy the home without factoring in profits from renting it out, you can buy it as a second home, which is typically simpler and more affordable.
If it is only possible to buy the property by using it as a rental for vacationers, then you must apply for a rental investment property loan instead.
Q: Is a second home mortgage different from a primary mortgage?
A: Although these two types of mortgages are similar in many respects, it is common for a second home loan to have a higher down payment requirement (you can expect a 10% minimum). Higher cash reserves also can make it easier to qualify for a second home mortgage.
Q: Will I have to pay a higher rate on a second mortgage?
A: Not necessarily. It all depends on your qualification factors as well as the lender you go through. In some cases, your second mortgage interest rate may be no higher than it would be for a primary residence.
Q: Will my credit score need to be higher for a second mortgage?
A: Once again, not necessarily. But as with primary mortgages, you will qualify for the most competitive rates and terms if you have a high credit score. This is a good reason to make sure that your score is in great shape before you apply.
Q: What are the down payment options for a second home mortgage?
A: Because down payments tend to be higher for second home loans, that can become a barrier for many would-be homebuyers of second homes or vacation homes. Here are your main options for covering that higher down payment:
- A HELOC
Think carefully about which of these options makes the most sense for you. With a HELOC, you are borrowing against the equity in your primary residence. But with cash, you are reducing your financial liquidity. Each of these options has its pros and its cons. So, your individual needs will determine which is most suitable.
Apply for a Competitive Second Home Mortgage in Washington State Now
Have additional questions about applying for a second home mortgage in Washington state? To schedule a consultation, please us today at (206) 352-6453. We look forward to helping you qualify for a competitive mortgage for a second home or vacation home.