How to Use a Mortgage to Buy a Vacation Home
Dreaming of a cozy mountain cabin or a beachside retreat? A vacation home can be both a relaxing getaway and a smart long-term investment. But before you start picking out furniture or planning your next escape, it's important to understand how financing a second home works. The good news? **You can use a mortgage to buy a vacation home—**but the process differs slightly from buying a primary residence.
Here’s what you need to know to make it happen.
Step 1: Understand What Qualifies as a Vacation Home
Mortgage lenders distinguish between primary residences, second homes (vacation homes), and investment properties. To qualify for a second home mortgage, your property must typically meet the following criteria:
It must be a reasonable distance from your primary residence.
You must live in it for part of the year.
It must be suitable for year-round occupancy.
You cannot rent it out full-time or use it primarily as a rental property (that would be considered an investment property).
If your vacation home meets these standards, you can pursue more favorable loan options and rates than you'd get with an investment property mortgage.
Step 2: Review Your Finances and Eligibility
Buying a second home is a significant financial commitment. Lenders often have stricter requirements for vacation home mortgages. Here’s what most will look for:
Higher credit score – Usually 680 or higher.
Larger down payment – Often at least 10%, sometimes 20% or more.
Stronger debt-to-income (DTI) ratio – Most lenders want to see a DTI below 43%.
Cash reserves – You may need to show several months’ worth of reserves to cover both your primary and second home mortgage payments.
Tip: Review your credit report and financials before applying to ensure you're in a strong position.
Step 3: Explore Mortgage Options
You can typically use conventional loan products to finance a vacation home, but your loan options will depend on your financial profile and how you plan to use the property.
Common loan types for vacation homes include:
Conventional Loans: Fixed or adjustable-rate loans from private lenders, often requiring 10–20% down.
Jumbo Loans: For high-priced vacation homes that exceed conforming loan limits.
Home Equity Loan or HELOC: If you have significant equity in your primary residence, you might use it to help finance your vacation home.
Cash-Out Refinance: Refinance your current home to access equity for your down payment.
Government-backed loans like FHA and VA loans generally do not apply to second homes.
Step 4: Get Pre-Approved
Just like with a primary home, getting pre-approved is a key step. A pre-approval letter strengthens your offer and gives you a clear picture of what you can afford.
When you apply, you’ll need to provide:
Proof of income (W-2s, tax returns, bank statements)
Information on existing debts and assets
Credit check authorization
Step 5: Work with a Local Real Estate Expert
Markets for vacation homes vary widely depending on location. A local agent who understands the second-home market can help you find properties that match your goals—whether you're looking for a quiet escape or a future rental opportunity.
Final Thoughts
Buying a vacation home is exciting, but it’s also a big financial step. Understanding how a second home mortgage works—along with the eligibility requirements and loan options—can help make your dream getaway a reality.
If you're ready to take the next step, our team at [Your Company Name] is here to help you explore your mortgage options and guide you through the financing process.
Reach out today to get pre-approved or speak with a mortgage expert about your vacation home goals.