Homebuyers who are ready to invest in a second or seasonal home will need to consider their options for financing. If they have an existing mortgage, the buyer will need a second mortgage. Reviewing how to get financing for a second or seasonal home helps the borrower make sound choices about their next investment.
Preapproval for a Second Mortgage
Preapproval for a second mortgage requires the homeowner to have higher than average credit scores and enough income to qualify for a new mortgage. The lender reviews the application and provides a preapproval for the mortgage. The preapproval shows the buyer how much funding is available to them for the second or seasonal home. The details make it easier for the buyer to establish a budget for buying the property, and it assures a real estate agent that the buyer has the ability to buy a home and isn’t wasting their time.
What are the Down Payment Requirements?
For a second mortgage, it is more likely that the borrower will need to pay at least 20% down to secure the mortgage. Some homeowners borrow from the existing equity in their primary home to pay the down payment. This is an effective strategy and could provide enough funds. However, there are several options for generating the down payment including a smaller personal law. The borrower should consider the ramifications of all choices and determine what choice is best according to the monthly payments and interest rates.
Reviewing Insurance Requirements for the Property
Reviewing insurance requirements for the property helps the buyer calculate their projected costs for insuring the second or seasonal property. The property buyer will need to buy at least homeowner’s insurance for the home. If it is in the designated flood zone, flood insurance is a requirement to secure the loan and the lender’s investment. Flood zones indicate that the property is at a greater risk of becoming damaged in a flood, and homeowner’s insurance won’t provide enough coverage for the property. Some lenders will require mortgage insurance for a specific term typically until the borrower has paid at least 20% of the mortgage off. Consumers who aren’t sure what to expect when financing a second home can find details available at NRIA right now.
Inspections, Title Insurance, and Closing Costs
Inspections are a requirement for all properties that will be financed. The findings of the inspection are reported back to the lender. Any major issues must be repaired by the seller before the sale continues. Title insurance is provided to the buyer to prevent them from facing any financial losses if the seller is unable to sell them the property. The closing costs are paid according to the terms of the mortgage contract.
Homebuyers who are ready to invest in a second or seasonal property start by getting a preapproval from their lender. The preapproval shows how much is available to the buyer and the highest mortgage amount. Reviewing the down payment and insurance requirements also helps the borrower calculate all upfront costs. Consumers who want to learn more about buying a second or seasonal home contact a lender right now.