Are you planning to invest in property? Real estate may be the shortest road to financial independence. Or, if you just want a place to relax on your off days, a vacation home at a beach or a mountain cabin may be just the ticket.

Whatever your dream, Old West Lending can assist with investment property mortgages.

Financing an investment or second home is unlike financing a primary one. These properties are more expensive to finance because they’re usually riskier in the eyes of lenders. That’s why they have limited mortgage programs.

But first, let’s understand some terminologies:

Primary Residence

Your main, principal, or primary residence is a home where you live most of your time.

It’s eligible for federal law tax advantages. If you have many homes, you can elect only one to be your primary residence that enjoys the tax advantages.

Suppose you live in a house in Florida for 49 weeks in a year but spend 3 weeks at a timeshare in New York. Your voter registration card, driving license, and mail have Florida’s address. So Florida’s house is your primary residence.

Vacation or second homes

Do you own any other home apart from the primary residence? Now that’s your second home.

Maybe it’s a vacation home where you spend your time off. It may also be a property you purchased due to regular traveling, like a condominium in Chicago. One thing to remember is that your vacation or second home isn’t your “home base.”

Investment property

You can own real estate with the sole purpose of making money. We call it an investment property. It includes ventures like flipping a house, or owning a rental property. Rental property could be a two-bedroom condominium, a single family home, a four-plex or a 200-unit apartment complex. We have loan programs for all of these.

How Financing A Vacation or Investment Property Differs From Funding a Primary Residence

Lenders view investment and vacation homes differently than primary homes. You see, a foreclosure will render you homeless if you default on the primary home loan. Who wants that? Most homeowners will pay their mortgage, even in tough times. On the other hand, investment and vacation properties are often luxuries. They lack that incentive to make borrowers pay if things turn bad.

That doesn’t mean there’s not a lender for such homes. It’s just that their loans’ terms may be stricter due to the heightened risk level.

The main home may require just a down payment of 3-5% (or less). This figure will most likely go up to 15-20% of the buying price for a non-primary property. Non-primary properties may also have higher interest rates.

Which Mortgage Options Aren’t Available for Investment and Vacation properties?

Generally, government-backed mortgages have lower qualification hurdles. However, they’re only available to borrowers planning to buy primary residences.

We are talking about:

• FHA (Federal Home Administration)

• VA (US Department of Veterans Affairs)

• USDA (United States Department of Agriculture)

Mortgage Programs For Investment and Vacation Properties

Our most popular investment property loan is a Debt-Service-Coverage-Ratio, (DSCR) loan. Typically, you put down 15-20% and the income from the property is used to qualify you for the mortgage. No personal income is used to qualify.

Old West Lending may bring your dream home or investment property empire within reach! We have your back from the prequalification process to helping you find a real estate agent.

Make Your Smart Choice

Investing in real estate has the potential for a tremendous pay-off. Getting the funds to finance an investment opportunity is a breeze if you know where to look.

As you weigh the loan terms, consider the long-term and short-term costs and how your bottom line can be affected. That’s where Old West Lending comes in to help. Call us today. We have options.