Whether you’re looking for a vacation home or an investment home, it’s still a great time to purchase a second home. With many foreclosures and short sales still on the market, you can find some amazing deals. However, unlike purchasing your first home, a second mortgage can be trickier to secure. 

A second home requires more than just saving for a 20 percent down payment for the home. Mortgage lenders make no secret that they are tougher on second-home loan applications than for primary homes. That being said, the current market is very lenient for borrowers looking to purchase a second home.  Below you’ll find tips on beating those stricter rules and purchasing a second home that makes sense for you.

Credit Score

Your credit score is key to securing a loan of any kind, but is especially vital when applying for a mortgage. If your credit score is less than stellar (below 700), it’s time to repair it. If your partner or spouse plans on co-signing, you’ll need to take their score into account. While debt can be healthy to carry, a mortgage lender will want to see that you have consistently paid your bills on time or in advance before extending you a large loan. Repairing or increasing your credit score should be your main priority when considering purchasing an investment property.

Leverage Your Assets

If you have an IRA or 401K, you may be able to use it as an asset. You don’t necessarily have to use this asset to purchase a second home, but your lender will want to make sure you have the assets to manage a second mortgage. Of course, your largest asset is probably your current home, and many lenders may encourage you to take a home-equity line of credit to finance the purchase, but you’ll want to carefully consider this option as these lines of credit typically bear higher interest. Before you apply for a second mortgage, you should have a full snapshot of your financial health, including your credit history and available assets.

Find the Right Loan for You

Just like finding the perfect home, securing the best second mortgage will require you to shop around. Finding a mortgage lender may be easy, but not all loans are created equal. You’ll have to choose between a 15 year mortgage and a 30 year mortgage and between a fixed-rate or an adjustable-rate mortgage. Each lender is different and requirements for second mortgages are not all the same from lender to lender. Discussing your options with the right mortgage professional is important. A mortgage professional can often discuss your options, giving you valuable knowledge about what the lender requires.

Get Pre-Approved for a Second Mortgage.

Before you start house hunting for an investment property, consider pre-approval for a loan.  Knowing the exact amount you are approved for can be a saving grace when house hunting for that perfect rental property. If you have been pre-approved by a mortgage lender for $80,000 don’t start your house hunt looking at foreclosures with list prices of $89,000. Banks that own the titles of foreclosure properties often do their research and list the home at an attractive, bottom dollar price. This means less wiggle room in getting a further reduction on the purchase price. With foreclosures and short sales, you’ll be competing with other investors as well as first time home buyers who do not have to adhere to the same difficult criteria you must in order to purchase a home.

When it comes to purchasing a second home, make sure to follow your head and not your heart. A second home should be a well-thought purchase, so make sure to develop a thorough view of your finances and what you can afford. Find the right home, and then work with a trust lender to ensure you make the best investment possible.

Mike Cushing is a freelance writer for New American Funding, a direct mortgage lender offering a number of home financing options including a 15 year mortgage at competitive rates in 21 states throughout the country.

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