Buying a Second Home

Investment properties and vacation homes. Whether you're looking for somewhere to get away to or would like the extra cash flow a rental property can offer, it's time to take advantage of low interest rates to finance your second home.

There are many things to consider before taking on two mortgage payments:

Down payment

On a second home, you will typically need to come up with a down payment of at least 10 percent to 20 percent of the home's purchase cost. Keep in mind each lender is different, so it's important to shop around to find the best loan terms for your financial situation.

Debt-to-income (DTI)

Think about how you're going to afford two homes. What is your current debt-to-income (DTI) ratio? Your DTI should be no more than 36% of your monthly pre-tax income. If you can't afford both mortgage payments (including taxes and insurance, etc.), and keep within that ratio, you may want to reduce your debt or consider a lower loan amount.


Getting insurance on your second home can be a challenge, especially if it's in a far away market. That's because insurance may fear the distance (from your primary home) will make it difficult to properly maintain the second home. Shop agents and rates, and consider supplemental insurance (such as flood insurance) if your second home is a vacation home somewhere tropical.

American Financing does not have an application fee like most lenders, so if you're considering buying a second home, call one of our mortgage consultants today at (800) 910-4055, or complete the online application. Let our expert team guide you through buying your dream home.

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