How to Buy a Second Home - Quicken Loans Zing Blog

As someone who’s endured his share of Michigan winters, I’ve often thought of how nice it would be to spend the winter in Florida. But I wouldn’t want to stay there year-round because the summer wouldn’t be as pleasant. Wouldn’t it be great to have a part-time residence that you could come and go from as you please?

If, like me, you find yourself continually drawn to a particular destination, you may want to consider getting a second home there. It’ll be cheaper in the long run than finding a hotel and will allow you to enjoy a longer stay. However, you’ll need to consider factors such as budget, maintenance and insurance as well as location when thinking about getting a second home.

Make Sure You Can Afford It

It’s extremely important to budget for having two mortgage payments unless you own your primary home free and clear. One thing that’s really going to help with this is:

Down Payment

If, one month, you find that you can only afford to make one mortgage payment, you’re likely to make the payment on your primary home first. Because second home loans result in increased risk for mortgage investors, you’ll have to make a slightly higher down payment. This is part of their assurance that you can afford it.

It means a higher down payment, but you’ll get a lower initial rate before the adjustment at the end of the fixed period.

Higher Rate

One of the reasons for mortgage bond investors to invest in second mortgages is that the homeowners pay a slightly higher mortgage interest rate. This means a higher payment on a second home than you would have on a primary property.

Now that we’ve gone over the budgeting of getting a second home, let’s make sure we go over what qualifies as a second home.

Occupancy Rules

In order to classify the property as your second home, you have to spend some significant portion of the year there. That said, if your loan is backed by Fannie Mae or Freddie Mac, you can also rent the property out for up to 180 days without it being considered an investment property.

Keep in mind that if you rent the property out for 15 days or more, you’ll have to report the income to the IRS. However, along with that, you may be able to deduct certain rental expenses. You do have to occupy the home for at least 14 days or 10% of the days it would otherwise be rented out – whichever is greater – in order to maintain your eligibility for the mortgage interest deduction. Lenders will probably also consider it an investment property if you don’t follow these IRS minimum guidelines for residency.

If you have a jumbo or other nonconforming second home loan, you’re still limited to 14 days of rental.

Location, Location, Location

If you’re going to buy a second home, it’s very important to consider the location. You want it to be far enough away that you can get away from the world, but not so far away that you never get there. If you plan on hosting family a lot, maybe look for something that’s centrally located within a few hours of everyone.

Make sure that the property you buy is within easy driving distance of everything that attracted you to this place to begin with.

There are restrictions on how much a property can be occupied by someone other than you, so it’s important that you see yourself spending a lot of time there. You’ll want to be there often enough to be able to handle the upkeep as well.

Handling Maintenance

Since your second home will be unoccupied at least part of the time, consider how you might handle these maintenance issues.

Utilities

You probably don’t want to pay too much for utilities if you’re not going to be around the house for a significant period of time, so one strategy would be to shut everything off.

Just be careful if you do this in a place with a cold winter climate. If you don’t keep the heat at a certain level, your water pipes could freeze and burst, causing all sorts of problems. If you prefer not to pay the gas bill when the property is unoccupied, you can always drain the water pipes before you leave.

You may choose to leave electricity on if you have a connected security system, as the security system can save you some money on insurance. But cable is safe to turn off when you’re away. You can do the same with the internet, as long as your security system doesn’t rely on it.

Homeowners Insurance

The cost of homeowners insurance on a second home will be higher. The Insurance Information Institute lists a couple of reasons for this, including that the property won’t be occupied consistently. This puts you at increased risk for theft or the frozen pipe scenario described above.

Your second home’s location can also play into your rates. If you have a remote location in the mountains or a beach house, Mother Nature can throw more at you and put you at increased risk for home damage.

If getting a second home sounds appealing to you, you can get started here or call (800) 785-4788. Where would you buy? Let us know in the comments.

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This Post Has 20 Comments

  1. We are looking to purchase a home in another state in 2019. My husband can move in immediately after the purchase and I can move in in Jan. 2020 when I retire. What kind of mortgage should we be looking for? We will sell our current home once I retire.

    1. Hi Traci:

      If your spouse is on the loan, under current regulations, he should be able to move in and occupy it and the rate you’ll get will be for a primary residence. I recommend speaking to one of our Home Loan Experts at (888) 980-6716 in order to go over the details when you get ready to actually start looking and make a purchase. Hope this helps!

    1. Hi Georgia:

      It’s possible to purchase a second home with a down payment of as low as 10%. It’s not possible to have more than one primary residence. It is by definition the home in which you spend most of your time. However, if you mean you want to take someone else’s second home and turn it into your primary residence upon purchase, that’s possible. I’m going to suggest you speak with one of our Home Loan Experts at (888) 980-6716. No matter what you’re looking for, they’ll be able to go over your situation and find the best possible option for you. Hope this helps!

      Thanks,
      Kevin

  2. I am in a FHA home now, two years old in Georgia. I want to use my first home as an investment and buy second home with minimum 10% down. May I know, my options here?

    Thanks.

    1. Hi RT:

      I’m going to advise that you talk to one of our Home Loan Experts at (888) 980-6716. The reason I say this is there may be an option to convert your current primary home into an investment property and then buy a new primary property with the option of a lower down payment and lower rates because it is a primary property. I think you should go over your options. Good luck!

      Thanks,
      Kevin

  3. Live am buying my home in California in my 4th year now, baught for 199k valued at 353k. I would like to buy retirement home in Las Vegas where my parents live and put them in the home until I can move there permenetly. I have about 15years more years to work. Will not sale my Los Angeles home but will rent it out. How can I purchase my law Vegas home do I have to put the 20% down? I don’t want to put more than 3% down is that possible on a second home? I do have a lot of equity on my first home but I don’t want to touch it

    1. Hi Tracey:

      It’s not possible to put 3% down on a second home. The minimum you’re looking at is 10%. Generally, lenders allow lower down payments on primary properties because you’re going to make the payment on that property first if anything happens, so it’s inherently less risky. That being said, one of our Home Loan Experts can certainly look into your options if you give us a call at (888) 980-6716.

      Thanks,
      Kevin Graham

  4. Kevin,

    I am looking to purchase a second home in another state due to relocation for work. I do not wish to sell my current home at this time and I have a family member who will be occupying my current home and essentially renting it from me at cost. What are my options for financing the new home.

    Thanks,

    Dave

    1. Hi David:

      Assuming you’ve been in your current home a while, you can work with your lender to convert it to an investment property without changing your interest rate. Then you can buy your new home as a primary property. When you’re ready, you can get a preapproval online through Rocket Mortgage. If you prefer, you can also give one of our Home Loan Experts a call at (888) 980-6716.

      Thanks,
      Kevin Graham

  5. What would be the best way to handle the following situation. We currently have a loan with QL and would like to buy a new home first, then sell current home. I would need to borrow about $40,000.00 until my current house sold.

    1. The type of situation you seem to be looking for is a bridge loan. We don’t offer those, but you might be able to get by with a personal loan from Rocket Loans. They do personal loans up to $35,000. One of our Home Loan Experts might also have some ideas. One other thing you could look at is potentially qualifying with both mortgage payments. I think the best thing to do would be to talk to someone by calling (888) 980-6716 and go from there. Thanks for reaching out!

      Kevin Graham

    1. Hi Joe:

      We do loans for second and vacation homes. We can certainly help you go over your options and see if we can get you into a loan that works for you. I’m going to recommend you speak with one of our Home Loan Experts by filling out this form or calling (888) 980-6716. Hope this helps! Thanks for choosing us!

      Thanks,
      Kevin Graham

  6. Do you have information for investment properties? I’m looking a property for investment, do you offer finance services for this type of property?

    Thank you

    1. Hi Jorge:

      We do offer investment property mortgages. If you’d like to get started online, you can fill out this form. Otherwise, feel free to give us a call at (888) 980-6716 and one of our Home Loan Experts will be happy to take care of you.

      Thanks,
      Kevin Graham

    1. Hi Derek:

      It is a beautiful home! Unfortunately, we use stock photography on the blog and I’m unable to track down where this home is located. Wherever it is, it sure looks like paradise.

      Thanks,
      Kevin Graham

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