Real estate markets across the country are seeing a similar trend: Buyers are taking advantage of the low mortgages by purchasing vacation properties. Specifically, they are buying homes in exotic locations, like at the beach or lake, or in the mountains for prime skiing.

While some of these buyers plan to use the second home as a vacation spot, many are thinking about the possible investment potential. Either way, some are running into trouble when it comes to mortgages. It may be hard to believe, but lenders are stricter with vacation home mortgages than for traditional homes.

Even with immaculate credit, getting a vacation home mortgage can be tough. If you’re thinking about purchasing that house near the slopes, or a lake-front property not too far from the kids, then consider how much it will really cost before you get your heart set on a specific property.
Vacation homes are often more expensive than a traditional home based on location alone, and as a result, lending is tighter. This doesn’t mean you should be discouraged, but it does mean you need to be hyper-aware.

Your credit must be great—720 or above for most lenders. The lender will also scrutinize your existing debt, property taxes, and the mortgage on your existing home.

Additionally, many lenders have been giving out “jumbo” mortgages for vacation and investment properties—mortgages with higher interest rates. Unfortunately, new mortgage guidelines put out by the Consumer Financial Protection Bureau will go into effect in 2014 and may put an end to these popular loans.

If you can afford it, you are better off paying cash than taking out a mortgage with sky-high fees.

Another thing you might want to take into account when looking for a vacation home? Location. Lenders heavily scrutinize the location of your future property.

While all markets took a property value hit, vacation destinations took the brunt of the real estate crash. If the lender thinks the home is in a location where prices may continue to drop, they may reject your loan application. Lenders may also be weary of giving out an out-of-state loan, or working with a location they are unfamiliar with.

A vacation home can be very rewarding, both in its ability to provide a relaxing escape for your family, and in its potential as an investment property. Just be sure to do your research before you jump on board the vacation home bandwagon.

As a Member of the Top 5 in Real Estate Network®, I have a wealth of real estate and homeownership information that may be of help to you. Feel free to contact me any time to learn more about this important information, and be sure to forward this article on to any friends or family that may be interested as well.

Sincerely,

Rose Price
roseprice@champaignrose.com
Prudential Landmark
Office: 217-352-1933
Mobile: 217-202-8843
http://www.ChampaignRose.com

This email was sent by RISMedia, Inc. on behalf of Rose Price.