Let’s talk about purchasing a 2nd property. 5 Points Realty has a lot of experience in this arena. Real Estate has always been a proven way to keep your wealth safe and build wealth while enjoying the asset for yourself. We live this philosophy as 5 Points Realty agents. In fact, our clients have come to know us as the go-to real estate firm for this type of real estate investment/asset mindset. Let’s look at some essential aspects of purchasing a 2nd property and look at some fabulous examples from our 5 Points Realty family of successful 2nd Homebuyers.
What you need to know about lending
Most buyers interested in purchasing a 2nd property will take out a loan. We called one of our preferred lenders from Flagstar bank, Kim Pleeger to get the skinny on 2nd property purchasing from the lender perspective.
There are some fundamental things to know about the lending aspect. First, what does a 2nd property mean to you? Ask yourself these questions.
- Do you intend to use this 2nd property as a vacation home in addition to your primary residence?
- Do you intend to use a 2nd home both for your use and as a rental?
- Do you intend to buy a property solely for income-generating purposes?
Let’s talk financing
Knowing your intent is very important to the lender to match the right type of loan with your intent. If you answered yes to questions one and/or two you would be seeking a 2nd Home loan. If you answered yes to question number three your loan will be an investment loan.
For an investment loan, you will need more money down. For the best interest rate, prepare to put down 25%. Fannie Mae only requires 15% down on an investment loan, but Mortgage insurers won’t insure a loan that is under 20% down.
For a 2nd home loan, you may only need to put down 10%.
The lender will look at a few aspects of this purchase to ensure it is a 2nd home, not a rental/investment property.
- The home must be suitable for year-round occupancy
- There can be no shared ownership agreements regarding the property like timeshare.
- According to Fannie Mae, the 2nd home “Must be located a reasonable distance away from the borrower’s principal residence”. Kim told us you can still rent the property out, but the home “Must be Occupied by the borrower for some portion of the year”. (Freddie Mac actually specifies 6 months out of the year.)
There are also some other factors the lender will consider that will affect your type of loan, down payment and interest rate.
- Is it a condo? If so, the down payment required by the lender may be higher.
- Is the loan Jumbo v. conventional? Anything over a purchase price of $647,200. is considered a Jumbo loan and will require a higher down payment.
Now to the fun part! Let’s check out some fantastic 2nd property purchases from our 5 Points Realty family.
Ian Leonard and his husband purchased a fantastic 2nd home in the lovely town of New Bern, North Carolina. They want to have a getaway in this lovely waterfront historic district. Because they both work and live in Charlotte, they hope to renovate and eventually rent to family and friends while enjoying the property themselves as much as possible.
Norma Hanson and her husband purchased a getaway pad in Lake Lure that is just for them. This is a true 2nd Home purchase.
Dawon Millwood and her wife Kelsey are investors. They have condos in the Myrtle Beach area of the “Grand Strand” that they rent as short-term rentals. In fact, if you’re headed to Myrtle Beach, have a stay at one of Dawon and Kelsey’s fabulous properties.