Are you planning to invest in property? Real estate may be a real deal on the road to financial independence. And if you just want a place to relax on your off days, vacation homes at a beach or serene place will delight you.

Whatever your dream, Old West Lending can assist with investment property mortgages. And the best part? We don’t dish out cookie-cut solutions. Expect highly personalized attention and services.

Financing an investment or second home is unlike financing a primary one. These properties are more expensive to finance because they’re usually riskier in the eyes of lenders. That’s why they have limited mortgage programs.

But first, let’s understand some terminologies:

Primary Residence

Your main, principal, or primary residence is a home where you live most of your time.

It’s eligible for federal law tax advantages. If you have many homes, you can elect only one to be your primary residence that enjoys the tax advantages.

Suppose you live in a house in Florida for 49 weeks in a year but spend 3 weeks at a timeshare in New York. Your voter registration card, driving license, and mail have Florida’s address. So Florida’s house is your primary residence.

But some cases can be complicated, like the one below.

Your job forces you to live in your Florida house for 26 weeks and a Chicago condominium for another 26 weeks. What address will your DL have? Between the two properties, which one does your family call home? You may have a “home base” even if most days find you traveling.

Vacation or second homes

Do you own any other home apart from the primary residence? Now that’s your second home.

Maybe it’s a vacation home where you spend your time off. It may also be a property you purchased due to regular traveling, like a condominium in Chicago. Sometimes, a hotel may be more expensive or not offer the comfort and peace you desire.

One thing to remember is that your vacation or second home isn’t your “home base.”

Investment property

You can own real estate with the sole purpose of making money. We call it an investment property.

It includes ventures like flipping land, a house, or rental property. Rental property could be a two-bedroom condominium, a single family home, a fourplex or a 200-unit apartment complex. We have loan programs for all of these.

The property can be a vacation home. For instance, you may rent out your beach house when you aren’t there.

How Financing A Vacation or Investment Property Differs From Funding a Primary Residence

Lenders view investment and vacation homes differently than primary homes. You see, a foreclosure will render you homeless if you default on the primary home loan. Who wants that? Most homeowners will pay thier mortgage, even in tough times. On the other hand, investment and vacation properties are often luxuries. They lack that incentive to make borrowers pay if things turn bad.

That doesn’t mean there’s not a lender for such homes. It’s just that their loans’ terms may be stricter due to the heightened risk level.

The main home may require just a down payment of 5% (or less). This figure will most likely go up to 15-20% of the buying price for a non-primary property. Non-primary properties may also have higher interest rates.

Funding a Vacation or Investment Property With a Conventional Mortgage

Conventional and Non-Qualified mortgages are the most common options for people looking to own vacation or investment properties. The loans generally have fewer restrictions because they aren’t government-backed.

But the required down payment may increase from the typical 15%-25% of the property’s purchase price if the home is for investment or vacation purposes.

The DTI (Debt-to-Income) ratio calculations won’t factor in your future rental income. You may also be expected to have available funds to cover at least six months’ worth of mortgage payments. (This is called reserves).

Which Mortgage Options Aren’t Available for Investment and Vacation properties?

Generally, government-backed mortgages have lower qualification hurdles. However, they’re only available to borrowers planning to buy primary residences.

We are talking about:

• FHA (Federal Home Administration)
• VA (US Department of Veterans Affairs)
• USDA (United States Department of Agriculture)

Mortgage Programs For Investment and Vacation Properties

Old West Lending may bring your dream home or investment property empire within reach! We have your back from the prequalification process to getting a real estate agent.

Make Your Smart Choice

Investing in real estate has the potential for a tremendous pay-off. Getting the funds to finance an investment opportunity is a breeze if you know where to look.

As you weigh the loan terms, consider the long-term and short-term costs and how your bottom line can be affected. That’s where Old West Lending comes in to help.