If you are currently a homeowner, you may be considering purchasing a second home to rent out or to use as a vacation home. While much of the process will be the same as when you bought your first home, there are many other factors to consider that you may not have had to examine the first time. It’s important to know what to expect when making this decision. Here are a few tips to help you purchase a second home or investment property:
A successful second home purchase process requires careful planning. Know what your budget is, and make sure you are accounting for all additional expenses that may be included. If you are looking to purchase a fixer-upper, for example, make sure you have an idea of what your budget is for repairs and renovations, and include that when determining your price range.
Your lender’s financial requirements for a second home purchase will be more stringent than when you purchased your first home. They will want to make sure you can afford to pay two mortgages. Your second home purchase may require a higher down payment, larger reserve requirements, and more financial assets. Additionally, second homes and investment properties are financed primarily by conventional loans, since you can only use a FHA loan on a home you intend to live in. Your Loan Originator can help you figure out what you can afford, and make sure you are accounting for all miscellaneous costs.
If you are looking for a second home to purchase as a vacation home, your needs will be different from those of someone looking to purchase an investment property to rent out. This is why it’s important to work with knowledgeable professionals who can help you make the right decision.
If you are looking for a vacation home, you may be looking in areas you aren’t familiar with. A Realtor who knows the area and the market can help you find homes that meet your criteria, and get the most value for your money. Likewise, if you are looking for an investment property to flip or rent out, your Loan Originator can help you set a realistic budget and understand your financing options.
Buying a second home can introduce different tax rules and tax deductions. Taxes in the area you’re looking to buy may be higher than you are used to, and the amount you are taxed may depend on factors such as your income level, how many days a year you occupy the property, etc. You may wish to consult a tax advisor when determining where to purchase your second home.
A second home can be a great investment. If you have any questions about purchasing a second home or investment property, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the process, click here to get started!