Now is a Good Time To Buy a Second Home — If You Can Get Approved
Even though the economy is doing fairly poorly right now, and even though the housing market is in trouble, for those who are looking, there are plenty of opportunities available. Indeed, the current low home values and prices offer an interesting chance for you to buy a second home. And, even though the interest rate you will pay on the mortgage of a second home is often higher than your first home, with mortgage rates at lows, it is possible to find some really good deals.
Of course, the real trouble is not in applying for a mortgage to buy a second home. It’s in getting approved.
Tighter lending standards make difficulties when buying a second home
Just like anything else that has to do with credit, getting a mortgage for a second home is rather difficult right now. And, because home values are low, people can’t use the home equity from a primary residence to raise a down payment on a second home. But that does not mean it is impossible to get approved. It just means you’ll have to try a little harder. Here are some of the things you can expect if you want to get a mortgage for a second home:
- Higher credit score. At the low end, you will need to have a 680 for approval. For the best mortgage interest rate, you will need at least a 720 — and some mortgage lenders want to see a 740 if you are buying a second home.
- Bigger down payment. You are going to need at least 5% in all likelihood if you want to buy a second home. Some mortgage lenders are resurrecting the old school 20% down payment rule.
- Better income documentation. You will have to prove that you can afford the mortgage payment on your second home. Additionally, if you are planning to count income from renting out the second home, you will have to go to great lengths to substantiate the amount of money you think you will get.
