Purchasing a Vacation or Second Home: What You Need to Know
Deciding to buy a vacation home is an exciting time for you and your family. You are choosing a home-away-from-home, perhaps on one of Maine’s beautiful lakes, the coast, or mountains. Here are a few things that you should know when buying a vacation home or a second home.
What is a Vacation Home?
- At least 50 miles from your primary residence.
- A one-unit property, condo or townhome but the unit itself must be for single occupancy.
- Must be occupied by you, the owner, for at least 30 days a year.
- Must be controlled by you and not by a property management or a timeshare company.
- It cannot be rented out for more than 14 days a year.
- Available to you, the owner, year-round.
How You Qualify for a Vacation Home Mortgage
A vacation home loan is considered a higher risk lending opportunity than one that is used for a primary residence. When you apply for your loan – there will be additional qualifications. Your lender will expect you to have:
- Income history that shows you can afford two mortgages, two sets of property taxes, homeowner insurance premiums, etc.
- Stable employment history and things such as under-utilized investment income in an effort to help to prove you can handle the increased expense.
- Have an acceptable debt-to-income ratio (DTI). A DTI of less than, say, 36% is a good indicator.
- Credit scores considered for a vacation or second home can be higher, but DTI and income history are all taken into consideration.
- Higher cash reserves to cover additional or unexpected expenditure are taken into account.
A Skowhegan Savings Bank Vacation Home Loan
At Skowhegan Savings, we aim to make things as simple and straightforward as possible. When you apply for a vacation home loan with us we can offer a mortgage of up to 80% to 90% of the total cost. Many lenders require a minimum down payment of 20% because private mortgage insurance (PMI) is not available on their second-home loans.
We offer fixed and variable interest loans for 10, 15, 20, and 30 years with a 60-day interest rate lock. These terms mean you can choose a mortgage that suits both your financial situation and future plans. The agreed interest rate is locked in long enough for you to find your dream vacation home and negotiate the offer and get to closing. We offer a bi-weekly payment schedule that can save you interest on the life of your loan.