Tahoe home-buying tips: Thinking of buying a second home? | SierraSun.com

Tahoe home-buying tips: Thinking of buying a second home?

David Colarchik
Special to the Sun-Bonanza

David Colarchik says it's important to understand that financing a second home is a lot different than a primary residence.

Freddie Mac recently predicted that 2016 might be the best year for housing in a decade, considering that within most sectors, sales, construction and prices set to reach new recent highs.

They base this on several factors, including mortgage rates, employment, household formation, rising home inventories and increasing prices.

Second homes are not as rare as one might expect. In fact, more than 20 percent of residential home purchases in 2014 were for secondary residences.

The numbers are rising, and it's important for those considering to understand that financing a second home is a bit different than financing the purchase of a primary residence.

Nevada's great tax benefits and improving economy, along with securing a home as a place to retreat and enjoy life's simple pleasures, are just a few of the reasons why many choose the Tahoe area to invest in real estate.

If you're thinking of buying a second home soon or in the future, align yourself with a knowledgeable, trusted mortgage adviser who will provide transparency of the process and guide you now on steps to make qualifying easier.

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Prepare a Down Payment

As a mortgage on a vacation property is considered higher risk, many lenders require buyers to have a larger down payment — generally 20 percent.

There are potential options for securing cash, such as taking cash out via a refinance on your primary residence while rates are still low. In fact, recently, the share of cash-out refinances were the highest since 2008.

Alternatively, you may want to consider taking out a home equity line of credit (HELOC) on your primary residence to finalize the purchase of your secondary residence. In many cases, a gift from parents or family is OK to use for a down payment, as well.

Identify the Interest Rate on Your Loan

If you plan to use your second home strictly for personal use, then you are likely going to be able to secure an interest rate that is comparable to that on your primary residence.

As mortgage rates are considered low, it is a good time to finance the purchase of a second home. Please note that if the second home purchase is for investment reasons, you may be locked into a higher interest rate — an increase of about 0.5 percent.

Qualifying

Qualifying to buy a second home can be trickier than qualifying for your first home. If you're self employed, it's always better to capitalize versus expense when possible, and if you're employed, think twice before filing a 2016 "Un-reimbursed Employee Expenses" form with your taxes.

It's imperative to get pre-approved or consult early with a mortgage professional in the earliest stages as you ponder buying your happy place.

David Colarchik is branch manager of the Tahoe branch of Supreme Lending, located at 264 Village Blvd., Suite 2B, in Incline Village. Visit davidcolarchik.supremelending.com to learn more.