Financing Your Second Home – Advice From Real Estate Experts
Are you looking into financing your second home? Maybe you need a little help putting together the paperwork for considering a vacation home. Whatever your situation, a little advice can go a long ways towards making the process as painless as possible. Even in today’s markets financing a second home can be a fairly straightforward process.
The days of walking into your local bank with an 800 FICA score and getting a fixed rate loan for financing your second home or condominium that you’ve decided to purchase are no longer an option. Banks now look at the condominium associations almost as much as the look at you, the buyer. It’s bad enough when you’re buying a single family home. For financing a vacation home, condo buyers, the application and approval process is getting even tougher.
The government backed mortgage finance companies have stopped guaranteeing mortgages in condo buildings where fewer than 70% of the units have been sold. And if the second home association’s budget does not have 10% in reserves for deferred maintenance they will not make the loan no matter what you put down. Fannie Mae, Freddie Mac and FHA have new stricter rules when it comes to condos & financing your second home. You may have to buy in an approved property, not have renters in your condo building, and prove higher cash reserve levels. The condo building approval process can take up to six months, as FHA combs through the property, its budget, financials and other information.
All of this is not good news for condo buyers. If you were like most of the folks who didn’t close before the end of 2009, you may now find themselves rejected for financing your second home if you are buying in a condo building that has not been approved or can’t be approved. When sitting down with your agent ask them which projects are Fannie Mae approved, how many owner-occupied units and rental units are in the building or phase, and if this is a condo-tel. We will discuss a condo-tel in the next posting to detail the in’s and outs of financing your vacation home.
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