How to buy a second home

It is the weekend, you are sitting in your favorite chair at home, enjoying some tea. It is early in the morning and the house is quiet. You can hear the birds chirp outside near the window, as the sun light is coming in. You think to yourself, it would be great to have a second home to get away to on the weekend and for holidays. This article will help you with just that!

What is considered a second home?

A second home is a home you use for more than 14 days or 10% of the days that you rent it out, whichever is greater. This is in accordance with the IRS, and also to some lenders.

Why are you buying a second home?  

Before going through the process of buying a second home, it is important for you to consider why are you buying another home, along with your other plans or responsibilities like retirement or your current mortgage and other expenses. 

Some reasons you may want to buy a second home are:

• You want a vacation home, where you can go to during some weekends with family or for holidays and celebrations, or a home where you plan to retire to.

• You want a home closer to work or school. You may live too far from your current job or you or your children may attend a far college so, it would make sense to buy a second home to ease up the driving.

• You want an investment property, where you will rent it out or flip it.

• You want to move to another home, but without selling your current one.

Costs and Financing

Costs

Now that you have figured out why you want to buy a second home, it is time create a budget and that starts with knowing the costs associated with a second home. Knowing these costs will let you know whether you can afford the home or not.

The main costs are:

• Mortgage: figure out how much you will be paying each month by financing the home. That is the main cost of the home.

• Insurance: generally, homeowner’s insurance cost more on a second home.

• Utilities: if your home is vacant for long periods of time, you will be able to keep the bills low by using a smart home system and only turning on the things that are necessary and maintaining of the home, if its rented maybe the tenant may pay for the utilities themselves. But utility costs must be considered since they can be high if not managed well.

• Maintenance: the usual maintenance of the home, taking care of the lawn, sprinkler system, and other maintenance; a landscape company will help with this, you may also use your existing landscape company and ask for a discount. 

Financing

How to afford a second home? Below are some ways of paying for your home:

Cash

This is the ideal and the best way to buy your second home, you avoid the financing costs which are the big costs of the home. If you are able, then that is the best option. Why? Because it is better to stay out of debt. Unless, you are using debt to generate more income, which would pay off that debt, debt should be left alone. 

Mortgage

Getting a mortgage, however, is the most common way to buying a home.

Here are some of the things to keep in mind for a second home mortgage:

• Debt to income ratio or DTI: The debt to income ratio or the amount of debt you have compared to the amount of money you make, you need a DTI of around 43% or less to be approved for a second home mortgage, according to Rocket Mortgage.

• Down payment: A higher down payment is required from lenders since it is riskier for a lender. Also, a higher interest rate will also be required. Be ready to put down 20% on the home although you may get a conventional loan which allow a 10% down payment.

HELOC

Another way is to use your Home Equity Line of Credit, which is taking a loan out of your existing home’s equity and use that to put a down payment and pay the other costs of buying a second home.

How to buy a second home

The steps to buying an additional home is similar to when you were buying your current home. Read in more detail on how to buy a home here. However the preparation phase now consists of determining why you want to buy a second home as well as how you are going to pay for it.

The steps to buying a second home are:

• Preparation phase:

  • Determine why you want to buy a second home

  • Determine how you are going to pay for it and the costs

• Buying phase:

  • Find a good agent

  • Set up an initial appointment or call

  • Determine your wants and needs for your home

  • Get pre-approved

  • See homes

  • Submit an offer

  • Do a home inspection

  • The final walk through

  • Execute the closing documents

  • Home delivery

How to buy a second home in Massachusetts

To buy a second home in Massachusetts is the same as mentioned above in this article.

• Consider why you are buying a second home

• Determine the costs and how will you afford the home

• Follow the steps of buying a home 

Conclusion

Now, that you have considered why you are buying a second home, and determined or is in the process of determining the costs of buying a home, I would like to be your agent and find you your next home.

If you are looking to buy your second home in the Eastern Massachusetts area or greater Boston area, it would be my pleasure to help you find that home!

Please fill out the form below and I will reach back to you shortly!