Tips For a Vacation Home Loan in Michigan

What are the benefits of buying a vacation home?

Cottage, cabin, beach house, family home, ranch, casita, or chalet— all are great names for your home away from home!

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.

Benefits of a vacation home

Pure fun

No need to explain this one! We love vacation homes just as much as anyone else, because they’re fun! Whether you’re grilling with friends, or fishing in solitude— your vacation home is unapologetically yours.

Build Equity

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.

Investment

Maybe you’re thinking about renting out your vacation home, to re-coup some of the cost (or make a profit!). The best part? Platforms like Airbnb or Vrbo make it easy. 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.

 

How do I get a loan for a vacation home?

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:

• Proof of income (W2s, pay stubs, etc.)
• 2 years of tax returns
• Bank statements
• Government ID

Ready to go? Let’s start! Fill out the application below:

 

Can I get a vacation home with 10% down? Do I need a high credit score?

Owning a second home in Michigan needs careful consideration. Here’s what to consider before buying a vacation home:

Down payment requirements

and we encourage you to place a higher down payment to avoid paying expensive monthly mortgage insurance. To remove PMI (private mortgage insurance), you’ll need to place a down payment of 20%.

Credit score requirements

Conventional loans require a minimum credit score of 620. That said, credit profile requirements are only one consideration in mortgage qualification. Your loan officer will be able to tell you more!

Which loan programs are available?

The only loan program available for second homes is the Conventional loan. All other loans available are government loans, which are restricted to primary residences.

Conventional loans are the most popular type of home loan! They are a fantastic tool for buying your second home anywhere in Michigan.

 

 

What should my debt-to-income ratio be for a second home loan?

Just like your credit profile, the DTI (debt-to-income) ratio is another qualification tool that largely depends on your overall financial health. The maximum DTI ratio available is 45% for second home conventional loans.

What does that mean? A 45% DTI ratio means your total monthly debt (including your primary and second homes) should not exceed 45% of your monthly income.

 

Are there any specific requirements to consider when getting a vacation home loan in Michigan?

Just like any home loan, vacation home mortgages have a range of requirements that all buyers must meet to qualify. Those qualifications include the following:

Vacation home loan requirements:

• 10% down payment
• Minimum 620 credit score
• 45% maximum debt-to-income ratio
• Good property condition
• No recent foreclosures or bankruptcies

 

How to buy a vacation home?

Set a budget— Make sure the monthly payment of your vacation home mortgage leaves you with a debt-to-income ratio below 45% and is well within your personal budget!

Choose your location— Each location has its own set of circumstances and things to consider. Those may include insurance, HOA fees, average home value, etc.

Get in touch with a loan officer— Fill out an application and start the process! A loan officer will be your best source of information and guidance while buying a vacation home.

 

Frequently Asked Questions

How do I buy a vacation home in Michigan?

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!

 

Can I put 10% down on a vacation home?

While second homes and vacation homes require 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.