Watching the sun rise over a glassy lake. Long summer days spent out on the water. Sunset boat rides. Bonfires with singing and roasting marshmallows. Bonding and memories that will last long after you’ve packed up the car to go home.
A lakehouse can be one of the most worthwhile purchases you make, an investment in a lifetime of unforgettable summer vacations and weekend getaways.
Owning a lakehouse can be a lot of fun, but it can also be a lot of work. From finding the right house to getting a mortgage to keeping up with maintenance, you need to be prepared before you go into the process.
Here’s what you need to know when you’re in the market for a lakefront vacation home.
Consider All the Costs
Before you start looking at houses, you need to consider whether you’ll really be able to afford an investment like this. It’s more than just being able to afford the mortgage; there are a lot of costs that come with owning a lake home.
Waterfront property, for starters, is generally more expensive than other property types, and if you’re purchasing it as a second home, financing will come with more stringent requirements. For example, second home purchases require a larger minimum down payment than primary residence purchases. Depending on the type of loan, you may be required to put a minimum of 10%, 15% or 20% (or more) down.
Insurance and Maintenance
You’ll probably have to pay for flood insurance, on top of what will likely be higher-than-average homeowners insurance costs. Even if you aren’t required to have flood insurance, you should still seriously consider it. Even just a few inches of water can cause costly damage to a home, and regular homeowners insurance typically doesn’t cover flood damage.
You’ll also likely have a larger maintenance budget on a lakefront property, as homes near the water tend to get more wear and tear, in addition to having more property components requiring time and money (such as a dock that needs regular maintenance).
Time and Effort
There are also non-financial obligations that come with purchasing a vacation home, especially one on a lakefront. You should think about whether all the maintenance and effort the home requires will be worth it to you – or if it would be worth it to pay someone else to take care of the house.
The Fun Stuff
Now, we can finally get to the reason you’re considering buying a lakehouse in the first place! While having a lakehouse can be a ton of fun, remember that all the activities you associate with it – boating, jet skiing, water skiing – aren’t cheap.
Make sure you know what gear you’ll be in the market for once the house is yours, and how much it will cost.
Make Sure You’re Getting What You Want
If you’re considering buying lakefront property, you’re probably envisioning spending many a sunny summer day swimming, paddling and fishing to your heart’s content. It would probably be disappointing if you found out after buying the house that you aren’t allowed to do any of those things.
Before you decide on a property, get the lowdown on what you are and aren’t allowed to do. Does the dock in the backyard actually belong to the property owner? Are watercraft with motors allowed on the lake? Is fishing permitted?
If there’s a homeowners association or similar governing body for the lake community, ask to see its by-laws.
Additionally, if the area is more rural or secluded, find out whether you’ll have to pay a premium for utilities. Figure out how close the nearest grocery store is. Consider the cost of having a landline set up if cell phone service is spotty.
Getting a Mortgage
So, you’ve thought it through and considered all the financial factors, and decided to buy a lake house.
First, you should consider how you want the property to be classified. Your lakehouse is probably going to fall into one of two categories: primary residence or second home. (If you’re interested in buying a lakehouse for the sole purpose of renting it out, you can check out our guide on purchasing an investment property.)
If you plan to move into your lakehouse and live there for most of the year, that makes it your primary residence. If you only plan to live there for part of the year while maintaining your primary residence, then it’s a second home.
Whichever route you take, the first step is the same: Get preapproved for a mortgage. This will enable you to start shopping for homes within your price range and make an offer on a home.
If you’re purchasing the property as a second home, you may need a higher credit score to qualify for a mortgage, and you might receive a higher interest rate due to the increased risk for the lender.
It’s also possible that you’ll have to get a jumbo loan, which is a mortgage for properties that cost more than limits for conventional mortgages allow. This type of loan comes with its own set of stringent requirements. To get a jumbo mortgage on a second home at Quicken Loans, you’ll need a minimum credit score of 720 and a debt-to-income ratio of no more than 43%. Minimum down payments start at 20%; the amount required depends on how much is being borrowed.
Find an Experienced Real Estate Agent
Purchasing a lakehouse is different from purchasing a regular home in many ways, which is why it’s so important to work with someone who knows what to expect and what to look out for.
When searching for a real estate professional, be sure to find someone who specializes in lakefront properties. This is especially important if you’re new to lake living and aren’t aware of the typical pitfalls that can come with owning a lakefront home. An experienced agent will know what questions to ask about the homes you view and what you need to find out about a home you’re considering before you make an offer.
Don’t Skimp on Inspections
Getting a home inspection is important no matter what type of home you’re buying, but it becomes even more vital when you’re considering waterfront property.
Water can do all kinds of damage to a home, so it’s important to make sure any houses you’re looking at don’t have problems with leaks or flooding. An inspector will make sure that you won’t have to deal with an unexpected water intrusion or mold issue upon move-in.
If the home is hooked up to a septic tank, you should have that inspected, as well. Repairs to a septic system can be expensive and inconvenient; if an inspector finds an issue, you can ask the seller to pay for it, rather than having to cover it yourself and deal with an unpleasant surprise when you’re trying to enjoy a weekend at the new lakehouse.
Once it’s all said and done, you’ll have a new, fun getaway spot to enjoy with your family or friends – and probably a handful of people you haven’t heard from in a while (as the saying goes, you never know how many friends you have until you have a lake house).
Put up your feet, bask in the sun and enjoy yourself. You’ve earned it. Oh, and don’t forget a life jacket!
Itching to get into your vacation home? Get the process started online or call (800) 785-4788 to chat with one of our Home Loan Experts! If you have any questions, you can leave them for us in the comments below.
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