Buying a Second Home
Owning a second home is an exciting opportunity, whether it’s for family vacations, future retirement, or as an investment. At Mutual of Omaha Mortgage, we’re here to help you navigate the complexities of purchasing a second home, making the process as smooth and stress-free as possible.
Are you ready to purchase a second home or investment property?
Before taking the leap into buying a second property, it’s important to evaluate your financial situation and goals. Ask yourself these questions:
- Can you comfortably afford the additional expenses? Remember, a second home means another mortgage, property taxes, insurance, and maintenance costs.
- Do you have a clear purpose for the property? Whether it’s for personal use, rental income, or a future retirement spot, having a defined goal will guide your purchase.
- Have you researched the market? Understanding the real estate market and local regulations for second homes and rental properties can impact your decision significantly.
If you’re confident in your answers to these questions, you may be ready to explore the benefits and responsibilities of owning a second home or investment property. For more tips on preparing for this big step, check out our detailed guide.
Second home vs. rental/investment property: What’s the difference?
It’s crucial to understand the differences between a second home and a rental or investment property, as each comes with distinct financial implications and lender requirements. Here’s a quick comparison to help you make the right choice:
| Second Home | Rental/Investment Property | |
|---|---|---|
| Usage | Primarily for personal use, occasional rental | Mainly for generating rental income |
| Location | Must be located a reasonable distance from your primary residence | Can be near your primary residence or in another city |
| Occupancy Requirements | Must occupy for a part of the year | Can be rented out year-round |
| Loan Terms | Generally lower interest rates | May have higher interest rates |
| Second Home |
|---|
| Usage Primarily for personal use, occasional rental |
| Location Must be located a reasonable distance from your primary residence |
| Occupancy Requirements Must occupy for a part of the year |
| Loan Terms Generally lower interest rates |
| Rental/Investment Property |
|---|
| Usage Mainly for generating rental income |
| Location Can be near your primary residence or in another city |
| Occupancy Requirements Can be rented out year-round |
| Loan Terms May have higher interest rates |
What qualifies as a second home?
To qualify as a second home, the property must meet specific criteria. Generally, a second home is:
Used primarily for personal, family, or household purposes. It cannot be subject to a rental agreement, though occasional short-term rentals may be allowed.
Located in a vacation or resort area, or at a reasonable distance from your primary residence. This helps differentiate it from a primary residence or investment property. A common guideline is that the second home should be at least 50 to 100 miles from your primary residence.
Occupied by the owner for some portion of the year. This is to ensure the property is not solely used for rental or business purposes.
The Wealth Builder Loan
The Wealth Builder Loans from Mutual of Omaha Mortgage is a DSCR loan (Debt Service Coverage Ratio loan) is a type of mortgage specifically designed for real estate investors to purchase or refinance investment properties. Unlike traditional loans that rely heavily on the borrower’s personal income and employment, the Wealth Builder loan focus primarily on the potential rental income the property can generate.
The wealth builder loan is available for a wide range of investment properties, including single-family homes, multi-unit properties, and condos. Unlike conventional loans, the Wealth Builder loan doesn’t typically require proof of employment, income verification, or tax returns from the borrower
Additional Resources
Buyer’s Market or Seller’s Market? 10 Key Indicators Every Agent Should Track
Beyond the List Price: Understanding the True Cost of Homeownership
How to Help Clients Understand & Adapt to Market Shifts
Ready to Purchase Your Second Home?
Let us help you explore financing options for your vacation or investment property. Our loan officers are here to guide you every step of the way.
