Vacation Home Loan Requirments

[Bradley Snyder]

Hello,

I would like to buy a vacation home this year, with the intent to mostly use it as a short term rental. I know I have to manage it myself and can't have a lease on it. I have great credit and think my current DTI is around 45%. Can anyone educate me on the loan requirements, as far as DTI requirements, cash reserves, or anything else I should expect?

[Andrew Postell]

@Bradley Snyder to clarify a couple of things here a "secondary" home is one that you will occupy part of the year. If you are using a Fannie Mae or Freddie Mac (if you recognize those names) type of loan for this they have some very specific rules for these types of transactions and some that are somewhat vague.

First, your downpayment requirement will be 10% down minimum.  You will gain the benefit of having a lower rate than an investment property because you will be occupying it for some time of the year (like a beach house that your family vacations to for example).  

It must be a 1 unit property, suitable to occupy year round, you must maintain control of the property (no timeshare stuff), and no property management control of the property either.  Freddie Mac does have a little more restrictive requirement that you must allow the property to be available 1/2 of the year for your personal use.

What's vague on it is that you must occupy the property "some part of the year".  So they don't have a specific time that you are obligated to occupy.

Anyway, I hope this helps in some way. Thanks!