When buying a vacation property, you’ll likely need at least two months of reserves. Credit score requirements for a second home are slightly higher than for a primary residence.
Debt-to-income requirements will depend on the size of your down payment and credit score.
You may be able to defray your monthly mortgage expenses by renting out your vacation home when you’re not using it.
If your new property qualifies as a second home, you may be eligible for lower rates than those for rental and investment properties.
The three main ways to purchase a second home or vacation property are: a cash-out refinance on your primary home; a HELOC (home equity line of credit) on your current home); or a conventional loan on the second home itself.
Rental homes and vacation properties are financed differently.
If you can qualify for your purchase without the property generating any income, buy it as a vacation home. You’ll get a better mortgage interest rate, and qualifying is more straightforward when rental income is off the table.
