by Brook Walsh
on Sunday, November 22nd, 2015 at 7:44pm.
Are you ready to buy a second home in Northern Michigan? Be it a vacation home, an investment property, or a new house, buying a second home can be difficult to finance. Lenders see a second home mortgage as a higher risk and they may be more wary about approving a loan. Many buyers shy away from investing in a new home in fear that they won't be able to get a mortgage on a second property. Don't worry, with this guide, finding and financing your property can be a smooth process.
Control Your Debt
One of the most important things you can do when buying a second home is to make sure your debt is controlled. Your lender should have a detailed report of all loans, mortgages and monthly bills that take away from your monthly income. Seeing an outlined copy of your expenditures will help the lender feel less at risk. Also, it's recommended that at least 60% of your monthly earnings are available for this second home.
Save, Save, Save
The best thing you can do when purchasing a second home is to give a large down payment. More money upfront means less interest is accumulating. Also, you're more likely to secure a loan as lenders will be more at ease with a large down payment.
Review Your Credit Score
You'll want to make sure your credit score is at least average, if not above average. Lenders are going to check that you've paid your credit cards and bills on time. There are not as many programs in place to help home buyers buy a second property, so be sure you are in good financial standing before doing so.
Know Your Stuff
Are you looking into purchasing a home and renting it out to tenants? While this can be a great financial investment, you should also be aware that this can be costly. Should anything go wrong with the property, you will be held responsible. Have the home inspected and make sure it's in good condition.
Homeowners should also be prepared that their homes may not be occupied all of the time. This can be troublesome if you're relying on the rental income to pay the mortgage. Be sure you can afford the mortgage payment if the home is unoccupied. If you're interested in renovating, you should provide your lender with a detailed outline of your planned improvements. This can help persuade the lender that their loan will be low risk and high return investment.
Homeowners should also be fully informed of all the additional costs that will be included with owning a second home. The additional expenses involved usually comprise home insurance, property taxes, and landscape maintenance. If you're purchasing a home out of the country or state, your property taxes are likely to be different than your first home. There are different rules for each state so be sure to talk to your lender about what kind of tax breaks you may qualify for.
Speak with many different lenders and find one that is right for you. Ask your friends and your real estate agent for recommendations. You should ask your lender as many quality questions as you can and clarify closing costs.
Purchasing a second home can be an exciting time for many people. Whether you're buying your dream vacation home or investing in a rental property, you should make sure that this investment will still allow you to be financially comfortable. Finding a lender for a second home mortgage can be tough, but with the right preparations, it can be mostly stress-free.
Brook Walsh is from Northern Michigan and understands lifestyle based real estate investing which is one of the reasons he's chosen to pursue his dream of helping real estate investors with their home buying needs. Learn more about Brook or start your home search now.