Buy that Get-away home...

By April Young Blackwell, Certified Mortgage Planning Specialist. Mortgage Industry Insider. NMLS 415648

I've noticed a trend lately in conversations with my clients. Talks about buying vacation home are on the rise. In fact, many people with vacation homes have already found themselves taking up residence full-time in their get-away homes.

There is no doubt that Covid has influenced their choices. If you are going to be quarantined, you may as well be indoors in a place that brings you peace and tranquility.

As tensions rise in the country with (Insert your choice here), families are looking for a retreat. With so many having the the ability to work from anywhere, it makes sense that people are looking to buy a home that is their home away from home.

Families are no longer going to that second home strictly on the random weekends or planned vacation. The second home is becoming the primary residebnce the majority of the time.

On the other hand, there are many who see the historic low interest rates and rising property values as an opportunity to invest in real estate even though they enjoy it less frequently. For some of these people, the purchase of this property their way of starting to pay off their future retirement home.

What does one need to know about buying a second home?

First, the down payment requirement is going to be at least 10% of the sales price.

Second, you can expect interest rates to be the same as a primary residence, so that's nice.

Third, you need to have income sufficient to pay for your primary housing payment, the second home payment AND any other debts and be within the maximum allowed debt to income ratio for you.

What if one wants to rent the property for rental income to help with the payments?

If you plan to purchase a second home that you will perhaps use just a couple weeks a year as you want to rent it out the rest of the time, your purchase will be classified as an investment property purchase. (Different from the IRS definition of a second home). The income you earn from the rental income will offset the mortgage requirement. This can help you to qualify if purchasing it as a "true" second home is out of the realm of qualifying.

What should one know about about buying a home as an investment property?

First, the minimum down payment requirement will be 20%

Second, the interest rates and discount points will be higher than that of a primary residence or second home.

Third, you can use 75% of the expected market rent as defined by the appraiser as additional income to offset the mortgage payment. This is great way to help someone grow their wealth through real estate.

Fourth, you will need additional funds for reserves. (You should have this anyway).

Whether you are thinking about getting away a lot or getting away a little, buying that home you intend to retire in 10,15, 20 years from now is something that is on the minds of many families right now.

Inventory is tight, so have your ducks in a row. Schedule a conversation with a mortgage specialist that can discuss the options with you and get pre-approved.

Getting pre-approved before you initiate the search is an essential part of the process and will provide peace of mind. Never fall in love with a home and make an offer on it without being pre-approved. The only exception to this is if you unless of course you can pay cash for the property.

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