Second Home Financing - Down Payment Percentage

What would a down payment % be on a second home?

2 Answers

Second home financing is a little more difficult than financing a primary residence.The minimum down payment on a second home is 10% for a conventional loan. If the property is located in a declining market an additional 5% down would be required. If the property is a condominium in FL a 20% down payment would be required.

A second home would need to be located a reasonable distance from your current residence. If the property is located close by your current residence the lender would consider it an investment property and require additional price adjustments to the interest rate.

FHA will not finance second homes for a purchase loan.

Depending on where you are in the nation, the downpayment could be as little as 5%, but most likely would fall into the 10% range. 

Your limiting factor is going to be whether or not you could obtain PMI for the home.  Most of the creative financing options from a year ago ( piggyback loans, 2nd mortgages, etc.) have gone by the wayside, especially when you are dealing with a 2nd home.  Most areas in the United States today are considered a declining market, and as such, require a higher amount of downpayment.

Unfortunately the Federal Housing Administration ( FHA) who allows lower downpayments only does 2nd (or vacation) homes under a strict set of guidelines.  I have been writing loans for over 5 years now and have never gotten an FHA 2nd home to work.

You should also be careful when discussing a 2nd home with a lender.  There are certain mileage restrictions (i.e. from your current home to the new home) that are required from lender to lender.  A good average is 100 miles away, in order to be considered a 2nd home and not a rental property.  There are certain circumstances where the mileage can be overlooked, so long as there is a reasonable explanation (i.e. Cape Cod, Fire Island, etc.)