A lot of people might be surprised about this, but in reality, not all vacation homes are expensive. However, although buying a second home is quite reasonable, it still needs a rather cautious planning and costing. Buying a second home means getting another monthly mortgage. You also need to worry about other fees like the interest, HOA dues, homeowners insurance, utility, maintenance, repair bills, and property taxes to name a few. But how can you do all that?
Paying the house price is the simplest option. Some people might find it hard to believe, but according to a 2010 survey, 36 percent of homebuyers actually did pay cash that same year. However, if you look at the housing market closely, it is really possible. Home values in some states like Louisiana have dropped, which lead to the decrease of home equity too. But because of that same reason, many lenders are hesitant to issue home- equity loans. They’re worried that if home values will somehow decline again, then they wouldn’t be able to get the money that they invested in the property.
Another way to afford a second home is by a conventional loan. However, a conventional loan requires a much larger down payment, it has stricter guidelines than loans that are on a principal mortgage and it also has higher interest rates. According to some experts in Lafayette, either Freddie Mac or Fannie can only guarantee 20 percent as a minimum down payment for a vacation home. Some mortgage companies even ask more than 20 percent.
Borrowers need to have at least 720 or more to qualify for a conventional loan. They also need to have a strong debt-to-income ratio to prove that they are capable of paying the second mortgage loan. Getting a mortgage for your first home is tedious, but getting another mortgage for a second line far takes longer than the loan for your principal residence.
Borrowers who would like to have a second home are restricted to use the loans accredited by the Federal Housing Administration. FHA loans are only allowed for first- time homeowners.
So if you’re interested in getting another mortgage for your second home, it would be best to reevaluate your credit score to make sure that it reaches the required points to qualify for other conventional loans. You have to make sure that you pay your bills on time and that you’re not missing out on any of your existing debt or loans. Getting a vacation house is worth the wait. But getting a second home means that you’re getting another financial responsibility. Just make sure that you are prepared for it so you wouldn’t get caught off-guard if anything happens.<< Back to the list.
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