Purchase or Refinance of a Vacation Home
Current State Availability
Residential Finance Network currently offers this product in the following states: Connecticut, Colorado, Delaware, District of Columbia, Iowa, Kansas, Maryland, Mississippi, Nebraska, Pennsylvania, Montana, Nevada, South Dakota, Texas and Wyoming. We expect to be in all 50 states by January 1, 2000.
Introduction
The goal of many people is to own a vacation home. Take a look at our guide to vacation homes and vacation home loans entitled, "Are You Ready for a Vacation Home" to get a better idea of what it is really like to own one. In addition to standard Fannie Mae/Freddie Mac loan products, we also offer a range of expanded criteria programs to help more vacation home buyers. Whatever your vacation home needs, Residential Finance Network is ready to help you find the best loan product with the lowest rate, points and fees.
A. Standard Fannie Mae/Freddie Mac Vacation Home Loan Programs
General Guidelines
Interest rates for Fannie/Freddie vacation home loans are the same as for owner-occupied primary residence loans. There are no rate add-ons.
All loans must be arms-length transactions. The borrower may not be affiliated with the builder, developer or seller, and the seller can not be a family member. The borrower must be a U.S. citizen or permanent resident alien. The property must be a single family residence or condominium (2 unit vacation home loans are allowed but require a 20% down payment). All vacation home properties must show in the appraisal that property values are stable or increasing, demand and supply is in balance or shortage, and marketing time does not exceed six months. When purchasing ask your Realtor if these conditions exist.
Down Payment Requirements for Vacation Homes
For loan amounts up to $240,000:
Institution Property Type Down Payment Mortgage Insurance Freddie Mac Single Family 5% Yes-35% coverage* Freddie Mac Single Family 10% Yes-35% coverage Fannie/Freddie Single Family 20% None required *Borrowers can purchase vacation homes with only 5% down if the loan is approved through automated underwriting and receives an "Accept" response or a "Refer with a minimum credit score of 700."
Additional Notes: Down payment requirements will increase in soft market areas.
Rate and Term Refinances of Vacation Home Loans
For all rate and term refinances of vacation home properties, the borrower must provide written documentation that the loan is at least 12 months old. The same equity requirements as for purchases apply to rate and term refinances.
Cash Out Refinances of Vacation Home Loans
Cash out refinances of vacation home loans are limited to 65% of the value of the property. An 80% cash out refinance will be allowed under the following special condition: 1) the loan is approved through automated underwriting and receives an "Accept" response or a "Refer with a minimum credit score of 680." The borrower should also have six months of payment reserves.
Getting Approved
Borrowers' primary housing debt on their primary residence should not exceed 33% of their total gross monthly income before taxes.
The total of all debts including the principal, interest and tax payment for the vacation home should not exceed 40% of total gross monthly income before taxes.
Many borrowers plan to rent their vacation home out for some portion of the year. Unfortunately, rental income from seasonal tenants can not be used to qualify for a vacation home loan.
For refinances, borrowers should make sure that their taxes are current before a title search is ordered, as delinquent taxes is grounds for denial of your loan. Also, if a borrower has a second mortgage on the property, that loan must be at least 12 months old.
Get Pre-Approved at No Charge
We encourage all vacation home buyers and owners seeking financing to submit an application for a pre-approval to determine your finance and credit situation.
B. Expanded Criteria Vacation Home Loans
General Guidelines
These programs are for vacation home buyers who need higher loan amounts or who may need no income verification loans. Borrowers should have very good to excellent credit, along with 2 to 6 months of payment reserves in assets after closing. Properties must be single family, PUD or low-rise condos.
Interest rates for these programs are generally 3/8% higher than rates for standard vacation home loans.
Down Payment Requirements for Vacation Home Purchases and Rate and Term Refinances with No Cash Out
Maximum Loan Amount Property Type Down Payment Mortgage Insurance $400,000 Single Family/Condo 10% Yes-25% coverage $500,000 Single Family/Condo 20% None Required $650,000 Single Family/Condo 25% None required
No Income Verification Loans for Vacation Homes
Another feature of expanded criteria loans is the no income verification option. Borrowers with credit scores of 660 or higher and at least 6 months of payment reserves in assets after closing can purchase a vacation home with a 25% down payment for loans up to $400,000. With a 680 credit score, sellers can provide 5% of the 25% down payment in the form of a seller second mortgage.
Get Pre-Approved at No Charge
We encourage all vacation home buyers and owners seeking financing to submit an application for a pre-approval to determine your finance and credit situation.
