Purchasing a Second Home

There is also the benefit of not having to pay for expensive hotel fees as well as going through the hassle of making and booking arrangements. In addition, a second home also allows you to be on vacation while still enjoying the comforts of being in your own house.

Rental vs. Vacation Home 

A second home can be a rental or vacation home. However, if you wish to rent out your place to pay for the costs of maintenance and other expenses, different rules apply. Please refer to purchasing an investment property to know the benefits and drawbacks of getting an investment property.

A vacation home will only be considered as such if:

• It is suitable for use year-round
• It is a one-unit home, instead of a multi-unit complex.
• The house is not under a timeshare arrangement, and is not rented full-time.
• The buyer has sole ownership of the house.
• It is not managed by a firm or entity that has control of occupancy.
• It is occupied by the owner for a portion of the year.
• It must be a good distance away from the buyer primary residence.

Before you start to contacting realtors, make sure the following are in order:

• Credit Score
  As with the purchase of your primary home, you need to make sure your credit standing qualifies you for the purchase of a second home. Take note, however, that credit score requirements for second homes are higher than for primary homes.
• Reserve Funds
  Your mortgage payments won’t go away simply because you lost your job or because there was a problem in your income source. Thus, you need reserve funds equivalent to two to six months’ worth of your mortgage loan payments,
• Additional Income Sources
  Purchasing a second home as an investment property gives you a source of funds to offset the costs of having an additional home. This is not the case with vacation homes so you need to ensure you have income from other sources to cover the added expense.