Cottage, cabin, beach house, family home, ranch, casita, or chalet — all are great names for your home away from home! A Vacation Home Loan is exactly what it sounds like — a mortgage for a second home rather than a primary residence.
Second homes are a dream come true for many, but often require an extra investment of time and money. The investment may be greater, but the results are incredibly rewarding.
Just like any home mortgage, a vacation home loan has a range of requirements that all buyers must meet to qualify. Those qualifications include the following:
To get a vacation home loan in Michigan you’ll need to submit a mortgage application with one of our Loan Officers! Here are some of the documents you’ll need to start:
Owning a second home in Michigan needs careful consideration. Here’s what to consider before buying a vacation home:
Start with the monthly payment you can comfortably carry. A useful target is to keep your total debt-to-income ratio at or below 45%, but the real number is whatever still leaves room in your life for travel, repairs, and the inevitable cottage improvement projects.
Build your estimate around the full PITI: principal, interest, property taxes (remember, vacation homes pay Michigan’s higher non-homestead millage rate), and homeowners insurance, which often runs higher on lakefront or seasonal properties. Run a starting estimate with our Michigan Property Tax Calculator and DTI Calculator.
Vacation homes require more cash than a primary residence purchase. Three buckets to plan for:
— A 10% minimum down payment (20% or more removes private mortgage insurance)
— Closing costs of roughly 2% to 5% of the purchase price
— Cash reserves, typically 2 months of full PITI on both your primary home and the new vacation home, often 6 months if you’re self-employed.
Common sources for the down payment include savings, money market accounts, a portion of vested retirement funds, or a HELOC on your primary home. If you need to close on the vacation home before your current home sells, a Bridge Loan is worth a conversation.
A pre-approval does two things: it tells you the price range you can confidently shop in, and it gives sellers a reason to take your offer seriously.
In competitive Michigan resort markets like Traverse City, Petoskey, and Saugatuck, a strong local pre-approval can be the difference between a winning offer and a wasted weekend of showings.
Have your last two years of W-2s or tax returns, recent pay stubs, two months of bank statements, and a government ID ready when you start the conversation. Connect with a Treadstone Loan Officer to begin.
Once you know the budget, narrow the where. A few questions to think through:
— Year-round access or seasonal road? Seasonal access can affect insurance and financing.
— Lakefront, inland lake, or in-town? Lakefront properties carry different insurance and appraisal considerations.
— Well and septic, or municipal utilities? Inspection scopes change accordingly.
— HOA or short-term rental rules? Some communities restrict Airbnb-style rentals.
Property type also matters for the loan itself. Single-family homes and most condos are straightforward; manufactured homes, log cabins, and non-warrantable condos add a layer of complexity that a Loan Officer can walk through with you up front.
Local matters more for vacation homes than almost any other purchase. A real estate agent who knows the lakeshore, the resort towns, or the Up North market will spot issues a generalist will miss: bluff erosion, frontage rights, septic age, year-round road status, and which neighborhoods actually hold their value. If you don’t already have one, we’re happy to connect you with an agent we trust in your target area.
When you find the place, your real estate agent will draft an offer. Once it’s accepted, you’ll:
— Submit your earnest money deposit
— Schedule inspections (general home, plus any specialty inspections like well/septic, dock, or shoreline)
— Lock your interest rate with your Loan Officer
— Send any remaining documents to underwriting
— Order the appraisal
Most vacation-home closings run 30 to 45 days from accepted offer to closing day, with timing shaped by inspection findings and appraisal scheduling in more remote areas.
At closing, you’ll sign the final loan documents, pay your remaining cash-to-close, and the title officially transfers. Once the loan is recorded, the property is yours, and the first cottage weekend can hit the calendar.
Aside from having the coolest mortgage staff on the planet…working with Treadstone on your mortgage in West Michigan gives you a distinct advantage in not only getting your offer accepted, but also in becoming a more successful and enlightened home owner.
Vacation Home mortgage rates fluctuate daily based on several financial indicators and trends, just like gas prices.
Get pre-approved with a local Lender, like Treadstone! We’ll give you all the tools and resources you’ll need to begin the process. Need a realtor? We’ve got connections!
While a vacation home loan requires a 10% minimum down payment, you must put down at least 15% when buying an investment home. In some instances, the down payment requirement can increase for both property types depending on your credit score or debt-to-income (DTI) ratio.
When you buy a vacation home, it’s an investment! By paying down your loan’s balance, you’ll build equity over the long-run, making it a great tool for building wealth. You may even be thinking about renting out your vacation home to re-coup some of the cost (or make a profit!). By turning it into a short-term rental, you could consider your Lake Michigan bungalow an investment! We have even helped clients purchase oceanfront rental properties in Florida and other states where we are now licensed.
Maybe this goes without saying, but Vacation homes are also simply fun! Whether you’re grilling with friends, or fishing in solitude — your vacation home is your getaway.
Occasional short-term rentals are typically fine on a second-home Conventional Loan, and many of our clients rent their cottage for a few weekends each summer. What disqualifies a second home is full-time renting, signing a property-management contract that gives a manager control of the calendar, or using projected rental income to help you qualify. If you plan to rent most of the year, you’ll need an investment property loan instead.
There’s no hard mileage rule on paper, but most lenders look for the property to be at least 50 miles from your primary home and to make reasonable sense as a getaway, not as a daily-use second house. Lakefront, resort-area, and Up North properties almost always qualify. A second house in the same neighborhood as your primary usually does not.
10% down is the lowest down payment available for a second-home Conventional Loan, and most lenders look for a credit score around 680 at that down payment level. If your score is lower, putting down 15% to 20% often opens the door. A Treadstone Loan Officer can pull a soft credit check and tell you exactly where you stand.
For a typical second-home Conventional Loan, you’ll need to show 2 months of full mortgage payments (principal, interest, taxes, and insurance) on both your primary home and the vacation home. If you’re self-employed or your file is more complex, that requirement often jumps to 6 months on each home. Checking, savings, money market accounts, and a portion of your vested retirement balance all could count.
Yes, and many of our clients do exactly this. A home equity line of credit on your primary residence is a common source for the 10% to 20% down payment on a vacation home. Just know that the HELOC payment will show up on your debt-to-income ratio when we underwrite the new loan, so it’s worth talking through with a Loan Officer before you draw on it.
Generally, yes. Second-home loans typically price a small premium above a primary-residence rate, because lenders view them as a slightly higher risk. Investment properties can price higher. The exact spread changes with the market and depends on your credit, down payment, and the property itself.
For many homeowners, yes. The IRS currently lets you deduct mortgage interest on up to $750,000 of combined mortgage debt across your primary residence and one second home, subject to itemizing and other limits. Tax rules change and personal situations vary, so confirm the details with your CPA before counting on a deduction.
Yes. If your equity is locked up in your current home and you need it for the down payment on the vacation property, a Bridge Loan can let you close on the new place before the old one sells. It’s a short-term tool, but it’s a clean way to avoid timing the two transactions perfectly.
