Mortgage - primary vs secondary/vacation residence

[masraum]

We currently rent an apt in town. We are considering getting back into home ownership. We are considering buying a home outside of town that we might use on the weekends or rent out periodically instead of getting something as a primary residence. Or I may start working from home permanently and we might live there. If we bought as a secondary, then we would likely eventually also be purchasing a primary residence.

We know that having a secondary/vacation will change your debt to income ratio which would affect getting a loan for primary residence.

We would like to know the various financial implications and pros/cons for the primary residence vs secondary/vacation residence mortgages and getting one before the other.

[look 171]

I don't think they count that as a secondary unless you own one currently? As long as you can proof that its rented, income from the rental's numbers match with the mortgage monthly most lender sees the debt a wash. It shouldn't affect other purchases.

[thingmon]

Getting something with enough land to qualify as a farm would be a good way to go. Keep the taxes low.

[Alan A]

Originally Posted by thingmon

Getting something with enough land to qualify as a farm would be a good way to go. Keep the taxes low.

In NY at least it has to make $ as a farm.
Otherwise everyone would have one.

[icemann427]

Obtaining mortgages for personal/primary residences are easier, cheaper, require a smaller down payment, and fall under less stringent qualifying criteria than do mortgages for investment property or secondary homes. Generally, to qualify for a mortgage for your primary residence, you are agreeing to reside in that home for a minimum of six (6) months. With that being said, things happen in life and there are allowed exceptions to that rule when certain life events occur. There are primary mortgage borrows who do take license with those rules and exceptions, though, since many mortgage holders don't usually check on the status of the mortgagee's.

If you were to purchase a rental/investment property prior to purchasing a primary residence, mortgage lenders, generally, only give you 3/4 credit for the generated income as a credit to your income/debt ratios in qualifying for the primary home mortgage. So, that is something to think about. While there are exceptions, 20% down to qualify for a secondary home/rental/investment property is the norm. Depending upon the purchase price of the home and your income/credit qualifications, you can qualify for a primary residence mortgage with as little as 3%-5% down.

If you are a borderline qualifier, it would be wise to obtain a mortgage for a primary residence, first. Subsequent to that, you can rent out that property, obtain a reliable income stream from that property, and then purchase another home using the new home as your new primary residence, which once again, would give you preferential mortgage qualifying treatment compared to a rental/second home/investment property.

[RWebb]

having a secondary/vacation will change your hassle factor

I keep thinking about it tho...

[masraum]

And just FYI, our credit union considers an "investment" property/loan, something separate from a "secondary/vacation" property/loan. So for us at least, there's primary, vacation and investment, and the three are different.

Thanks for the responses.

[MBAtarga]

My understanding is a "secondary/vacation" home has to be at least 50 miles from your primary residence - otherwise it's treated as an investment property.