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Second Home VS Investment Property

What are my options for each when considering down payments, rates and how each affect my ability to secure a mortgage?
  • December 25 2013 - Davenport
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Answers (5)

If you are going to use the property for atleast two weeks out of the year then you can do it as as Second home ( the property can not be in the same town where your primary home is, at least 50 miles away and makes sense as a second home) , your rate for second home will be much better than investment property and you can put as little as 10% down with 660 crdit score

Tom Bawany
Mortgage Loan Originator
NMLS # 519971
  • February 04 2014
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Profile picture for Arizona Mortgage Pro
Investment properties will be less favorable in almost every way relative to second homes when it comes to mortgages. Terms will likely be less favorable, down payment requirements will be higher, and the guidelines will be stricter. 

Underwriters pay special attention to second homes to make certain the borrower's true intention is to use the property as a second or vacation home and not to skirt the rules to get better pricing on an investment property. This includes determining the distance to primary home (50+ miles is pretty standard, but not a concrete rule), whether or not it is in a vacation destination (lake, sea, mountain, etc. nearby), whether or not the borrower has other investment properties owned and so on.
  • December 26 2013
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Your options depend on the use of the property.  If property is going to be rented out, an investment loan would be required option. 20% down and typically 3-6 months of reserves. The rate would be .375-.50% higher than owner ocuupied/second home loan. If property is not going to be leased and qualifies as second home, the down payment would be min. of 10%, and rate would be same as owner occupied. Mortgage Ins would be required and availability could be limited. A second home loan would be slightly less restrictive as far as qualifying. In both cases one would need to qualify with current housing expense and new loan payment.
  • December 26 2013
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The distance from your primary will factor in whether it will be considered a 2nd home or not. Investment property usually requires 20% down when you can have as low 5% with a 2nd home.  Rates are usually slightly higher with an investment property as well.
  • December 25 2013
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For me, you go with an investment property. 
  • December 25 2013
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