Second home mortgage rates vs. investment property mortgage rates
● Compare rate options
● Same factors as primary apply (anything additional?)
● Talk about DTI requirements briefly
Second home financing
● Second home: one you’ll live in for part of the year, but not full time.
● Occupancy: part-time occupancy required
● Second home interest rates: slightly above market
● Down payment: usually 10% or more
● Credit score: 640 or higher
Investment property financing
● Investment property: one you will not live in at all and plan to rent out year-round.
● Occupancy: not required
● Investment property loan rates: 0.50% to 0.75% above market
● Down payment: 15% to 25%
● Credit score: 640 or higher
Compare to: primary home financing
● To give you a clear idea of what those benchmarks are, here are the typical lending rules for primary home mortgages:
● Occupancy: required
● Interest rates: standard market rates
● Down-payment: starting at zero percent (with grants)
● Credit scores: Starting at 500
Why the rules are different
● The home you live in (your “primary residence”) is seen as the least risky form of real estate.
● Of course, borrowers will find different lending standards for different types of property, depending on the lender and the mortgage program. So it’s important to compare loan options before financing a second home.
Can you avoid higher rates?
● It might be tempting to list your second home as a primary residence, and profit from lower rates or easier qualification. But it’s unwise to do so.
Other FAQs
● Are you allowed to have overnight rentals?
● Are there limits regarding how many nights you can rent?
● How much time must you spend there for it to qualify as a vacation home instead of an investment property?
● Can you have an accessory dwelling unit?
Second home mortgage rates vs. investment property mortgage rates
● Compare rate options
● Same factors as primary apply (anything additional?)
● Talk about DTI requirements briefly
Second home financing
● Second home: one you’ll live in for part of the year, but not full time.
● Occupancy: part-time occupancy required
● Second home interest rates: slightly above market
● Down payment: usually 10% or more
● Credit score: 640 or higher
Investment property financing
● Investment property: one you will not live in at all and plan to rent out year-round.
● Occupancy: not required
● Investment property loan rates: 0.50% to 0.75% above market
● Down payment: 15% to 25%
● Credit score: 640 or higher
Compare to: primary home financing
● To give you a clear idea of what those benchmarks are, here are the typical lending rules for primary home mortgages:
● Occupancy: required
● Interest rates: standard market rates
● Down-payment: starting at zero percent (with grants)
● Credit scores: Starting at 500
Why the rules are different
● The home you live in (your “primary residence”) is seen as the least risky form of real estate.
● Of course, borrowers will find different lending standards for different types of property, depending on the lender and the mortgage program. So it’s important to compare loan options before financing a second home.
Can you avoid higher rates?
● It might be tempting to list your second home as a primary residence, and profit from lower rates or easier qualification. But it’s unwise to do so.
Other FAQs
● Are you allowed to have overnight rentals?
● Are there limits regarding how many nights you can rent?
● How much time must you spend there for it to qualify as a vacation home instead of an investment property?
● Can you have an accessory dwelling unit?