Short Term Rental/Vacation Home Mortgage Recommendation

Short-Term & Vacation Rental Discussions
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Short Term Rental/Vacation Home Mortgage Recommendation

Dennis Cobos
Walnut Creek, CA · Member since 2015 · 33 posts · 15 votes

I'm a new investor looking to get into short-term rentals, and in doing my research I've come across the '10% down vacation home mortgage' so I'm looking for lenders that offer this. Any lenders that you would recommend for this type of loan?

Any help would be appreciated! Thanks!

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Luke CarlPro Member
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
4y

all lenders offer vacation homes. vacation homes are not for renting though. If you've got a big enough day job to back up the mortgage then you'll qualify for 10% and you CAN put it on vrbo when you're not using it. But if you're running spreadsheets... it's a rental, and that's a different mortgage.

Anyway to answer your question, any lender CAN do second homes. If they're saying no it's because they're just not used to it. Call someone else.

Can't ask for recommendations here on BP so I won't give any.

Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
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  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    4y

    all lenders offer vacation homes. vacation homes are not for renting though. If you've got a big enough day job to back up the mortgage then you'll qualify for 10% and you CAN put it on vrbo when you're not using it. But if you're running spreadsheets... it's a rental, and that's a different mortgage.

    Anyway to answer your question, any lender CAN do second homes. If they're saying no it's because they're just not used to it. Call someone else.

    Can't ask for recommendations here on BP so I won't give any.

    Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
    5Reply
  • Scott Schuhwerk
    Lender · Lincoln, CA · Member since 2014 · 45 posts · 17 votes
    4y

    @Dennis Cobos, following what Luke said, most lenders should be able to offer this as 10% down is standard for a conventional second home purchase.  There are some new hits that were recently announced from Fannie Mae for the LLPAs (loan level price adjustments) that will increase the cost/rates for second home financing. I included a chart below so you can see what those LLPAs will look like , as you will see the closer you get to a 90% loan to value (10% down) the larger the hits to the rate are, therefore increasing the costs/rates.  

    One way to still get 10% financing without these large hits is to break the financing up into a 1st and 2nd mortgage (HELOC) and still only have 10% down. For example a 75% 1st mortgage and 15% second mortgage (HELOC) keeps your rates/costs down while still accomplishing the same goal of 10% financing on a second home purchase.


    Let me know if you have any questions I can answer for you on this 

    @Dennis Cobos

    0Reply
  • Dennis Cobos
    OP
    Walnut Creek, CA · Member since 2015 · 33 posts · 15 votes
    4y
    Quote from @Luke Carl:

    all lenders offer vacation homes. vacation homes are not for renting though. If you've got a big enough day job to back up the mortgage then you'll qualify for 10% and you CAN put it on vrbo when you're not using it. But if you're running spreadsheets... it's a rental, and that's a different mortgage.

    Anyway to answer your question, any lender CAN do second homes. If they're saying no it's because they're just not used to it. Call someone else.

    Can't ask for recommendations here on BP so I won't give any.


    Hi @Luke Carl - I didn't know all lenders offered vacation home loans, so I appreciate you sharing! I currently don't own a home so the second home mortgage wouldn't apply to me. Is this loan only offered as a second home loan?

    0Reply
  • Daniel Sanchez
    Real Estate Agent · Houston & College Station, TX · Member since 2020 · 47 posts · 27 votes
    4y
    Quote from @Luke Carl:

    all lenders offer vacation homes. vacation homes are not for renting though. If you've got a big enough day job to back up the mortgage then you'll qualify for 10% and you CAN put it on vrbo when you're not using it. But if you're running spreadsheets... it's a rental, and that's a different mortgage.

    Anyway to answer your question, any lender CAN do second homes. If they're saying no it's because they're just not used to it. Call someone else.

    Can't ask for recommendations here on BP so I won't give any.


    To clarify, the biggest distinction between a second home and a rental is the 10% down?

    0Reply
  • Jonathan StonePro Member
    Rental Property Investor · Camas, WA · Member since 2020 · 285 posts · 202 votes
    4y
    Quote from @Daniel Sanchez:
    Quote from @Luke Carl:

    all lenders offer vacation homes. vacation homes are not for renting though. If you've got a big enough day job to back up the mortgage then you'll qualify for 10% and you CAN put it on vrbo when you're not using it. But if you're running spreadsheets... it's a rental, and that's a different mortgage.

    Anyway to answer your question, any lender CAN do second homes. If they're saying no it's because they're just not used to it. Call someone else.

    Can't ask for recommendations here on BP so I won't give any.


    To clarify, the biggest distinction between a second home and a rental is the 10% down?

    Second home loans, specifically vacation home loans, are available with as low as 10% down.  They are still backed by Fannie and Freddie and therefore get favorable rates and terms.  Favorable compared to standard investment financing in some ways. 

    There are clauses that come with those terms though. IE the loan we got for our coast property requires we use it a minimum number of days per year and cannot lease it out either directly or through a property manager for STR use, for a period of time.

    Hope that helps.

    2Reply
  • Daniel Sanchez
    Real Estate Agent · Houston & College Station, TX · Member since 2020 · 47 posts · 27 votes
    4y
    Quote from @Jonathan Stone:
    Quote from @Daniel Sanchez:
    Quote from @Luke Carl:

    all lenders offer vacation homes. vacation homes are not for renting though. If you've got a big enough day job to back up the mortgage then you'll qualify for 10% and you CAN put it on vrbo when you're not using it. But if you're running spreadsheets... it's a rental, and that's a different mortgage.

    Anyway to answer your question, any lender CAN do second homes. If they're saying no it's because they're just not used to it. Call someone else.

    Can't ask for recommendations here on BP so I won't give any.


    To clarify, the biggest distinction between a second home and a rental is the 10% down?

    Second home loans, specifically vacation home loans, are available with as low as 10% down.  They are still backed by Fannie and Freddie and therefore get favorable rates and terms.  Favorable compared to standard investment financing in some ways. 

    There are clauses that come with those terms though. IE the loan we got for our coast property requires we use it a minimum number of days per year and cannot lease it out either directly or through a property manager for STR use, for a period of time.

    Hope that helps.

    Thanks for the clarification. This does help me get a better understanding of the regulatory/financial constraints regarding STR. 
    0Reply
  • William Beck
    Realtor · Branson, MO · Member since 2018 · 274 posts · 283 votes
    4y

    Condos have extra complications with 2nd home loans since a lot of STR communities end up being "non-warrantable". You can research what that is on the ol' Google, but that will break a deal if you're trying to do a condo and do the 10% down route.

    0Reply
  • AJ WongBusiness Member
    Real Estate Broker · Oregon & California Coast · Member since 2022 · 834 posts · 696 votes
    2y
    Quote from @Dennis Cobos:

    I'm a new investor looking to get into short-term rentals, and in doing my research I've come across the '10% down vacation home mortgage' so I'm looking for lenders that offer this. Any lenders that you would recommend for this type of loan?

    Any help would be appreciated! Thanks!

    @Joseph Chiofalo is one of my go to lenders for STR or low down payments vacation rental home loans. I find a lot of investors are searching across broad areas and even states so it's nice to work with a lender that's licensed nearly Nationwide. He just closed a jumbo STR loan for a client here in Oregon and the same referred borrower also purchased an STR home in NYC.

    541-800-0455
    Sesemi | STR Brokers powered by Fathom Realty 516 Reviews
    WebsiteView Page
    0Reply
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