Are you looking to buy your second home? You most likely have several questions about how you can finance another residential property. Whether you want to buy an investment property or one that you can use for vacations, obtaining financing or mortgage for this kind of property come with certain challenges that you need to know.
The first thing you need to consider is getting a government loan. Government backed loans like FHA loans are not offered for second homes. They are offered to encourage home ownership by providing low down payments as well as easy qualifying requirements. FHA programs only ask up to 3.5% down payment and the credit score of the borrower can be as low as 580. In some cases, government lenders, if they agree to finance a second home, will require a bigger down payment. It is possible to get a government backed mortgage loan in a second home if you plan to live in it full time. Additionally, if you have an existing FHA loan on your first house, you might be able to obtain a new FHA loan on the second property you want to buy by having the first one rented out. But you still have some explaining to do.
In most cases, you will need a general loan to finance your second property. One advantage of conventional loans is that there are minimal restrictions on the kind of home that you plan to buy. You have the option to buy a condo, single family, or a property with up to four units. Conventional loans will require you to make a large down payment of at least 10% to obtain a conventional loan on a second home.
You also have to prove that you have sufficient income to get the approval you need to obtain the loan for your second home. You also have to meet guidelines related to debt to income ratio for faster approval. In case you have a mortgage on your first house, this implies you have to show sufficient income to pay for your first and second mortgage without reaching a debt to income ratio of more than 41%. You also need to have a credit score of at least 620 if you wish to qualify for a conventional mortgage loan for your second home. You will have a better rate if you have a higher credit score.
You must not close your unused credit lines. There are instance when this can cause your credit score to drop. However, when it comes to a home secured credit line, it commonly will not be an issue. You have to know more about the HELOC that is tied to your home’s equity. But in terms of unsecured credit cards or credit lines, the average age of all open account will make up about 15% of your credit score.
You should not open new accounts if you are trying to get a Myrtle Beach mortgage approval for your second home. Opening new accounts will cause your credit score to drop. You also need to consult with your real estate agent when purchasing a second property. Some homebuyers believe that they will be able to cut costs by representing themselves. This this is not always the case unless you are a real estate agent by trade. By working with a real estate agent, you will have some professional help when choosing the best loan for your property and help you with all the complicated matters and processes involving the purchase of your second home.
Call MB Mortgage Pros if you want to know more about how you can get financing for your second home.
MB Mortgage Pros
630 Chestnut Road
Myrtle Beach, SC 29572