Thinking about buying a second home in Salt Lake? Making the decision to purchase a second home is a big undertaking that can also come with substantial rewards. To put you in the right frame of mind and prepare you for the important details, here’s what you should know about buying a second home in Salt Lake.
What’s the Purpose?
Before you start looking through the for sale listings, you want to take a step back and figure out what you’re wanting to get out of buying a second home.
Maybe you’re looking for a summer getaway/vacation home, or maybe you want to start bringing in some additional income by renting out the home in a desirable neighborhood. Taking the time to know the role the property will serve in your life helps you determine what you’re looking for from the property, and narrow down your search.
If the plan is to rent out the property, you will want to tailor your house search even more by establishing the kind of tenant you’re looking to attract. Laying all of this groundwork ahead of time makes the rest of the process that much easier.
Know Your Lender Limitations
Chances are you will be relying on financing from a mortgage lender, and the vast majority of lenders have a minimum number of days you need to be staying at this second property to qualify for financing.
The details of this will be blatantly stated in any contracts you sign, but you want to find out these limitations before signing on the dotted line. The reason lenders require a certain amount of time to be spent at your second home is to make sure you’re aware of anything amiss happening on the property. This helps them decrease the likelihood that a major structural issue, such as burst pipes or a roof in poor repair, go unnoticed for too long.
Do also keep in mind that second homes are ineligible for government loan programs such as USDA and VA loans. These programs require that the mortgaged property be your primary residence.
Finally, lenders will have tighter guidelines for income, credit score, and debt-to-income ratio when lending for a second home. Expect to jump through some hoops to get everything finalized with your chosen mortgage lender.
When creating a budget that includes paying for a second home, we recommend you round all costs up slightly to view things from a realistic worst-case financial scenario.
Try to get as many details regarding estimated monthly payments, interest rates, and minimum down payment from your lender. It’s highly likely that your interest rate and down payment will be relatively higher on your second home, and you want to be ready for that before getting too far into the process.
Also, get an estimate for any necessary insurance on the new property and round that up a bit as well. A large part of making your second home purchase a success comes down to budgeting properly and living within reasonable limitations.
Consult a Professional
A final piece of helpful advice is to consult a local accountant or attorney.
The goal here is to get the ins and outs of any local, state, and federal stipulations regarding your second home.
Secondarily, this also gives you the perfect opportunity to get information on potential tax benefits you could reap from a second home. The tax benefits will be limited by the purpose of the property and the amount of time you occupy the residence throughout the year, just like we discussed previously.
Putting all of these elements together will help give you a much clearer picture of your financial situation moving forward.
Help When Buying a Second Home in Salt Lake
If you’re thinking about buying a second home in Salt Lake and don’t quite know where to start, contact us today at (801) 755-3865!