Working with a mortgage broker is a different experience than working with a bank specialist. It’s also a different part of the home buying process compared to working with your Realtor. Some people may have never worked with a mortgage broker before and don’t know what to expect. Because of that, there are some questions…Read Article
Buying a Second Home or Home For a Family Member
Did you know that you can purchase a second home within your same city and outside of it? Your second home may also be a vacation property or a property for a family member who cannot qualify currently themselves.
In this blog post, we’ll go over both scenarios and explain how it may work for you and your situation.
Buying a second home with 5% down.
When we talk about buying a second home, it’s possible with 5% down. Here are some of the potential scenarios that this fits:
- Buying a residence for a student whether in town or not
- Buying a residence for a direct family member who cannot currently qualify themselves
- Buying a residence for a family member who is just starting their career
- Buying a vacation property or second residence for yourself
There are many other scenarios, but those are some main ones that are common. If you’re hoping to buy a second home with 5% down, but don’t fit into the four situations I mentioned above, that’s okay! Please reach out to me and we can chat about your situation. I’ll ask you some simple questions to get a better idea of your finances and situation, and let you know what I think your best options are.
How to afford a second home.
With as little as 5% down for your down payment, the biggest question you may have is how you’re supposed to come up with those funds.
Whether you use a HELOC, savings or refinance your current home to pull equity out for your down payment (as long as you have 20% equity), there are multiple ways to accumulate your down payment. Just like the first home purchase, you’ll need to consider your down payment as well as your income levels to qualify for a second mortgage.
When purchasing a second home for a vacation property or a family member, you would treat it just like you were buying a home for yourself and all your debt and income will come into play. This is the case even if you don’t ever plan on living there and you’re buying it for a family member.
Here’s some more easy-to-digest information when it comes to that:
- Your existing mortgage, property taxes, credit cards, loans, etc. are included in your debt.
- Your existing mortgage cannot be debt-serviced unless you are planning on converting it into a rental property. The full debt from the property will apply.
- The down payment cannot be a gift if you are buying for a family member, but may be a gift if you are buying as a second home or vacation property.
- You will not be able to claim income from your new property, even if your family member is paying you rent.
There are many more details about each of these scenarios, but the main item I wanted to be clear on is that you can complete any of these scenarios with as little as 5% down payment, depending on your situation.
Renting out your first home when buying a second home.
If you’re looking to buy a second home and rent out the first, I have an in-depth blog post on that topic. The information is a bit different if you’re turning your first home into a rental property.
Here’s where you can find the “Buying a Second Home & Renting Out The First” blog post.
Your next steps.
These are the common scenarios that make buying a vacation property or a home for a family member possible. But, like I mentioned above, there may be other cases that fit into this model as well.
Reach out to me today to discuss your situation and let’s figure out what will work out best for you. Fill out the contact form, apply through the pre-approval form or give me a call at 250-826-3111 today.
I look forward to hearing about your situation and figuring out how I can help make owning a second home a reality for you.