What Down Payment Will I Need for a Second Home?
Whether you’re looking for a second home as a cozy getaway spot or a savvy investment, one of your first questions is likely: What down payment will I need for a second home?
In this post, we provide insights into the financial nuances of buying an additional property to help you unlock your real estate aspirations. We’ll share the minimum down payment requirements and provide tips to possibly secure a second home without an upfront payment.
Put a Second-Home Expert in Your Corner
If you’re considering buying a second home, working with a top agent can help you navigate every step and avoid common pitfalls. HomeLight network agents are some of the most experienced second-home specialists in the country.
Common reasons people buy second homes
Buying a second home isn’t just a financial decision; it’s often a choice that reflects your lifestyle or long-term goals. Here are some of the most common reasons homeowners decide to invest in a second property:
- Vacation getaway: A personal retreat in your favorite vacation spot, where you can relax and unwind any time you wish.
- Rental income: A source of passive income through short-term rentals or long-term leases.
- Retirement planning: A future home for retirement, in a location you love.
- Family and legacy: A place to gather with family, create lasting memories, and pass down through generations.
- Investment: Diversifying your investment portfolio and capitalizing on real estate appreciation.
What’s the minimum down payment for a second home?
When buying your first home, you typically have more financing options that break the “20% down payment requirement” myth. In fact, on average, most first-time homebuyers place a down payment of just 8%. But with a second home, most lenders require a minimum down payment of 10%.
However, the minimum down payment required can vary widely depending on several factors, including the lender’s policies, the property’s location, and how you plan to use the home. Here’s a closer look at what you can expect:
- Conventional loans: Typically, lenders require a minimum down payment of 10% for second homes. However, it’s not uncommon for some mortgage providers to boost this requirement to 15%-30%.
- Loan type and lender requirements: Some lenders may offer specialized loan products for second homes with different down payment requirements. It’s crucial to shop around and compare offers from various lenders.
- Credit score and financial health: When buying a second home, your credit score and overall financial health will also be scrutinized more. Most lenders will expect you to have a credit score of at least 620. A second home loan backed by Fannie Mae will typically need a score of 640, a 25% down payment, and a debt-to-income ratio below 36%. Your chances of financing approval are much higher if you have a score of 700 or above.
Second home down payment examples
In the table below, we provide a set of example down payment amounts based on a range of property values above and below a median home price of around $400,000.
| Home price | 10% down | 15% down | 20% down | 25% down |
| $200,000 | $20,000 | $30,000 | $40,000 | $50,000 |
| $300,000 | $30,000 | $45,000 | $60,000 | $75,000 |
| $400,000 | $40,000 | $60,000 | $80,000 | $100,000 |
| $500,000 | $50,000 | $75,000 | $100,000 | $125,000 |
| $600,000 | $60,000 | $90,000 | $120,000 | $150,000 |
| $700,000 | $70,000 | $105,000 | $140,000 | $175,000 |
| $800,000 | $80,000 | $120,000 | $160,000 | $200,000 |
»How much will you need?: Check out HomeLight’s handy Down Payment Calculator
from HomeLight Blog https://www.homelight.com/blog/buyer-down-payment-for-second-home/
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