Buying a second home
If you are currently considering buying a second home or have had it on your mind for the future, it can be an exciting thing to plan for. From purchasing a vacation home you and your family can enjoy, to purchasing a home to invest in, the reasons American’s purchase a second home can be endless. Buying a second home is something that should be done when you’re financially ready to make the investment, and are sure it won’t exhaust all of your financial resources. Weston Dean Custom Homes, a premier New Braunfels custom builder
, shares the top questions to ask yourself before you purchase a second home.
The first question to ask yourself is do you really understand what it takes to carry a second home? Having two homes means carrying around two of everything. Not only does this mean the basics like furniture, appliances, and household items but bigger ticket things such as two tax payments, two insurance payments and two homes to maintain cleaning, lawn care and so on.
Typically, you will need as much as 30% down for your second home if you need to seek financing. In addition to a higher down payment, your lender might ask for extra documentation that the buyer has extra cash on hand or a lower than usual debt-to-income ratio. Lenders will typically put a buyer under more scrutiny over a second home, than you would have had when buying your first home.
The second question you should ask yourself when buying a second home is how much time you plan to spend there? It is good to take into consideration how much time you plan on spending at your second home and also the phase of life you are in. If your kids are young and you plan on enjoying the home with them as they grow up, it can be a good investment. If you’re unsure of how long into the future you will use the home or if your kids are at the age where they might outgrow the home or interest in spending time there, give it a second thought.
The third question to ask yourself is what lender will you use? While the simple answer may be going with the same lender as your primary home, it is often a good idea to seek a lender who specializes in the area you’re purchasing your second home. It also can help to choose a lender who deals with the type of property you plan to buy: condominiums, hotel condos, resort condos, and so on. It will also make a difference if you choose to rent any of these properties while you are not staying in them.
If you’re in the position to choose between multiple lenders, your choice should come down to: cost of the transaction, interest rate, terms of the loan and then whether it is a mortgage broker who will branch out to independent lending firms or a more traditional bank.
The fourth question you want to ask yourself will be what is the worst-case scenario for the second home and can you withstand it? Ideally, you want to be in a situation with your second home where you can comfortably afford it in the first place. If you plan to rent the home, you need to make sure you can afford the home if the renters never come. If you can’t carry the home on your own financially 100%, it is best to hold off until you can.
The fifth question to ask yourself with a second home, is are there any changes you want to make to the home? If you want to add a pool, add a garage, or make any additions to add to the home’s value, do your homework first. Make sure you are able to make the changes that you want and there aren’t any HOA rules blocking what you want to do, and that the changes or improvements you plan to make will actually add value to the home.
Lastly, the final question you will want to ask yourself is what will your exit plan for this home be? Know that it might take 6-12 months to sell and average-price home, since second homes typically take longer to sell than in traditional markets.
If you are comfortable with the questions above and have a plan of attack that you feel comfortable with, then a second home will be a great addition to make moving forward.
Weston Dean Homes is a San Antonio area custom home builder. For more information call (210) 408-9107.