Second Home Loan Options - Get the Best Mortgage for Your Vacation Home

Introduction to Second Home Loans

Purchasing a second home can be a great way to enjoy a vacation getaway or generate additional rental income. However, financing a second home comes with different requirements compared to purchasing a primary residence. The Mortgage Calculator offers a variety of loan programs to help borrowers purchase or refinance a second home, including conventional loans, jumbo loans, and Non-QM mortgage options.

This guide explores the different types of second home mortgage options, eligibility criteria, down payment requirements, and links to helpful pages on The Mortgage Calculator website to help you choose the best financing solution for your second home.

1. Conventional Loans for Second Homes

What Is a Conventional Loan for a Second Home?

A conventional loan is a mortgage that is not backed by a government agency and follows the guidelines set by Fannie Mae and Freddie Mac. Conventional loans are a popular option for financing a second home because they offer competitive interest rates and flexible terms.

Eligibility Requirements:

  • Minimum credit score of 680 or higher

  • Down payment of at least 10% for second homes

  • Debt-to-Income (DTI) ratio under 45%

Loan Limits:

  • Loan limits for conventional loans are set by the FHFA. For 2024, the baseline conforming loan limit is $726,200, with higher limits in high-cost areas.

? Learn More About Conventional Loans

2. Jumbo Loans for High-Value Second Homes

What Is a Jumbo Loan?

A jumbo loan is a mortgage that exceeds the conforming loan limits established by Fannie Mae and Freddie Mac. Jumbo loans are often used to finance luxury vacation homes or second homes in high-cost areas where the loan amount exceeds conventional limits.

Eligibility Requirements:

  • Minimum credit score of 700+

  • Down payment of at least 10-20%

  • DTI ratio under 45%

Loan Limits:

  • Jumbo loans typically exceed the conforming loan limits of $726,200 in most areas or $1,089,300 in high-cost areas.

? Learn More About Jumbo Mortgage Loans

3. FHA Loans for Second Homes – Limited Use

What Is an FHA Loan?

While FHA loans are primarily designed for primary residences, certain borrowers may qualify for an FHA loan to finance a second home under specific conditions. However, most borrowers looking to purchase a second home will not qualify for FHA financing, making conventional and jumbo loans more common options.

? Learn More About FHA Loans

4. VA Loans – Restrictions on Second Homes

What Is a VA Loan?

VA loans are designed for eligible veterans and service members who are purchasing a primary residence. VA loans cannot be used to purchase a second home or vacation property unless the borrower intends to occupy the property as their primary residence.

? Learn More About VA Loans

5. Non-QM Loans – Flexible Financing for Second Homes

What Is a Non-QM Loan?

A Non-QM (Non-Qualified Mortgage) loan offers flexible financing options for borrowers who do not meet the strict guidelines of conventional loans. These loans are ideal for self-employed borrowers, real estate investors, and those with non-traditional income sources looking to finance a second home.

Popular Non-QM Loan Options for Second Homes:

Eligibility Requirements:

  • Minimum credit score of 600-680, depending on loan type

  • Higher down payments (typically 10-25%) depending on the loan type

  • Flexible income documentation requirements

? Learn More About Non-QM Loan Options

6. Fixed-Rate vs. Adjustable-Rate Mortgages (ARM) for Second Homes

Fixed-Rate Mortgage

A fixed-rate mortgage offers a predictable monthly payment by locking in the interest rate for the duration of the loan term. Fixed-rate loans are ideal for second home buyers who plan to keep the property long-term.

? Learn More About Fixed-Rate Mortgages

Adjustable-Rate Mortgage (ARM)

An adjustable-rate mortgage (ARM) starts with a lower initial interest rate that adjusts periodically based on market conditions. ARMs can be beneficial for second home buyers who plan to sell or refinance before the rate adjustment period begins.

? Learn More About Adjustable-Rate Mortgages

7. Investment Property Loans vs. Second Home Loans

Key Differences Between Second Homes and Investment Properties

While second homes and investment properties may seem similar, lenders treat them differently. Understanding the differences is important for determining the best loan option.

Second Home Characteristics:

  • Property must be used primarily for personal use

  • Limited short-term rentals may be allowed, but not as a primary source of income

Investment Property Characteristics:

  • Primarily used to generate rental income

  • Subject to higher down payments and interest rates

? Learn More About Investment Property Loans

8. DSCR Loans for Investment Properties

What Is a DSCR Loan?

A DSCR (Debt-Service Coverage Ratio) loan allows borrowers to qualify for a mortgage based on the cash flow generated by the property rather than personal income. This loan is popular among real estate investors who want to finance investment properties or second homes that generate income.

? Learn More About DSCR Loans

9. HELOC Loans for Second Homes

What Is a HELOC?

A HELOC (Home Equity Line of Credit) allows homeowners to tap into the equity of their primary or second home. A HELOC is a revolving line of credit that can be used to finance home improvements, consolidate debt, or cover other expenses.

? Learn More About HELOC Loans

Apply for a Second Home Loan Today

If you are ready to purchase a second home or refinance an existing property, The Mortgage Calculator offers a variety of loan programs to meet your needs. Our team of mortgage experts can help you find the best financing solution to make your second home dreams a reality.

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Frequently Asked Questions About Reconsideration of Value (ROV):