Do you dream of buying a vacation home but it feels too far off? Maybe you feel comfortable making the payments, but some rental income makes it easier. Fortunately, a Fannie Mae loan allows for buying a second home to rent out. That’s right, a buyer can purchase a second home with a low down payment, could get a great rate, and is allowed to rent it out too. By combining the excellent terms of a second home with the ability of making rental income, it makes owning a second home easier than before. Not long ago, any rental income received meant the loan must be an investment property loan. That meant a higher down payment and interest rate. Although, let’s show you how to benefit from rental income while enjoying your own vacation home.
Buying a Second Home to Rent Guidelines
First of all, a second home must be occupied by the owner at least two weeks out of the year. Now, an owner may use it anything higher than two weeks as well. But, what about the rest of the time? Well, it can be rented out on as vacation rental. Although in order to treat the property as a second home, no rental income may be used to qualify the buyer. There’s nothing wrong with receiving as much rental income as the owner can get, but Fannie Mae will not allow the rental income for mortgage qualification. Conversely, if the rental income is needed to qualify the buyer, then it must be treated as a rental property. Therefore, more down payment and a higher interest rate is required.
Benefits of Buying a Second Home to Rent
Low down payment, interest rates as low as a primary residence, getting rental income, and building wealth through real estate sounds pretty good! With interest rates near all time lows, buying a second home to rent makes a lot of sense. Especially when the interest rate is fixed for 30 years. Second home benefits include:
- Choose your own dates to vacation in your property
- May be used for single family homes, condos, manufactured homes, town homes, and more
- 10% down payment
- Only 5% of the price must be buyer’s own down payment funds
- 5% down payment may be gift funds
- Vacation rental income offsets & maybe fully pays for the annual expenses
- Lower mortgage insurance rates
- Seller allowed to pay buyer closing costs
Buying a second home sounds a little easier, doesn’t it? As little as 5% of a buyer’s own funds not only helps achieve a vacation property, but it is also a way to invest in real estate. Besides personal usage, buying a second home to rent is a way to create wealth through real estate.
Reach out to an OVM Financial loan officer today