According to an April 2014 report from the National Association of Realtors, annual sales of vacation homes jumped nearly 30 percent to a little more than 717,000 homes. Vacation home sales represented 13 percent of the total housing market, their highest share since 2006.
While the rate of vacation home purchases was on the rise in 2013, the rate of investment homes fell 8.5 percent to an estimated 1.1 million in 2013. That’s down from the 1.21 million investment homes purchased in 2012.
Location! Location! Location!
Scottsdale, Arizona and Taos, New Mexico are topping the charts as two of the most popular luxury vacation home destinations. Both offer the flexibility of snow and water activities, as well as high-end retail and spa amenities.
With the combination of natural beauty and luxurious conveniences, vacation and retirement home sales in New Mexico, Colorado, Florida and Arizona continue to be the hot spots of real estate activity.
“Vacation homes in the top markets continues to be a sound investment,” states Mark Watson, Vice President of Sales at Guardian Mortgage Company. “With housing prices on the rise and rates still at all-time lows, now is a great time to purchase a vacation home.”
Second Home Mortgage Loan Know-How
Wherever your vacation home aspirations may lie, knowing before you buy is still the best plan for locating the best option for your second home. As with your primary residence, take time to study the area’s economy, crime rate and housing trends. And visit the area at least once before you begin your home search.
Qualifying for a mortgage on a vacation or second home is relatively similar to financing your primary home purchase. One of the biggest differences in the process is typically seen around the down payment aspect. Vacation-home buyers typically made 30 percent down payments on average in 2013 versus the now standard 20 percent on standard home mortgage loans, according to the National Association of Realtors.
With the passing of new home mortgage lending regulations in January 2014, lenders now review a borrower’s entire financial picture prior to making a lending decision, which has been seen as invasive and excessive in the eyes of many consumers. In addition to the change in down payments, the new provisions require that a borrower’s total debt payment cannot exceed 43 percent of their pretax income.
To assist with the qualification for a second home loan under the new regulations, many lenders are guiding their potential homebuyers to consider making a down payment larger than 20 percent. This typically drops the monthly payment considerably and allows for many second-home buyers to qualify.
When considering a second home mortgage, prepare by reviewing your credit history, calculating your debt-to-income ratio and useonline mortgage calculator tools to assist you in finding out what you’ll qualify for before you speak with a Mortgage Loan Officer.
Marcus McCue |
EVP & CBDO