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Vacation Home Buying Process

Shopping for a vacation home can be exciting, but finding the right financing option can seem intimidating. With PHH Mortgage, it doesn't have to be.

We’ll help you understand the vacation home buying process, help you find a financing option that fits your particular situation and answer your questions every step of the way. It all starts with a call to (800) 210-8849.

This overview walks through what’s involved in buying a vacation home, so you’ll have a good sense of what’s to come before you jump in.

Determine What You Can Afford

This is an important first step in the decision process. Key costs to consider are:

  • The down payment: Just as with a primary residence, this is the part of the property purchase price paid in cash and not financed with a mortgage. The larger your down payment, the lower your monthly mortgage payments – and be prepared that you may be required to contribute a higher down payment for a second home.   
  • Closing costs: As with a primary residence, these costs are due at closing and complete the transfer of ownership. They include the loan origination fee, attorneys’ fees, initial escrow payments and the costs of obtaining title insurance and a survey. Closing costs are typically based on the home price and will vary according to the location of your vacation property.
  • Monthly payments: Similar to a primary residence, monthly payments for a vacation home are based on both the principal (the amount of the loan) and the interest (the amount you pay to borrow money, calculated as a percentage of the amount borrowed). These payments may also include money to be held in escrow for taxes, homeowners’ insurance and mortgage insurance.
  • Additional expenses: Utilities, insurance, cleaning services, homeowner association dues, property management fees – these are also costs to consider at this stage, especially if you’re considering using the home as a rental property.

Talk to one of our loan consultants who will help you find the financing option that fits your particular situation. Call (800) 210-8849.

Get a Pre-Approval Decision

Take a few minutes to call us for a loan pre-approval decision before you start looking for properties. Knowing the amount you can borrow can help you feel more confident going into your search.

If you do receive a loan pre-approval decision, the process will result in a letter that you can take to your real estate agent to facilitate the buying process. In fact, most real estate agents will ask you to have a pre-approval letter in hand with the loan amount indicated before they show you homes.

Know What to Expect

When purchasing a vacation home, it’s important to consider the impact of financing the purchase. If you are still financing your primary home, you must be prepared to have and manage two mortgages simultaneously. Remember that the vacation home will differ – loans for vacation homes typically require a larger down payment and are subject to higher interest rates than loans for a primary residence.

Evaluation criteria for a vacation home include your debt-to-income and housing-to-income ratios. Your debt-to-income ratio is based on your total monthly debt payments, including your mortgage payments on a primary residence, and how much you earn. It’s important to know your debt-to-income ratio going in, as it is expected to be below 36% to obtain a second home. The housing-to-income ratio reflects the total amount you spend each month on housing, including mortgage payments on a primary residence. 

Explore Your Options

Once you find the vacation home you want, your real estate agent can provide you with a list of comparable homes (known as “comps”) recently sold in the area. Comps help you determine the right price to offer. As with the purchase of a primary residence, there are important factors to consider, such as the condition of the vacation home, the cost of any necessary repairs, the competitiveness of the market in that area and more.

Vacation property decisions also carry other considerations, including access, the surrounding tourism region and rental income potential. Search for properties online to get an idea of the homes available in your price range.

Remember: any offer you make could become legally binding, so we strongly recommend carefully thinking through the details and consulting with your real estate agent.

Finalize the Home Inspection and Loan Commitment

As with a primary residence, your offer for a vacation home should contain provisions for a home inspection by an accredited home inspector and an outline of actions to be taken if problems arise. The inspection should cover interior and exterior structural elements as well as heating/cooling, electrical and plumbing systems. Even if an out-of-town trip is involved, it's a good idea to be present during the inspection so you can ask questions about the property.

The loan commitment takes place once we approve the loan and receive an acceptable appraisal and title search that meet our guidelines.

Close on the Property

You’ve done your research, asked informed questions and evaluated your options – and you’ve found a vacation home and financing option that work for you. Now it’s time to close the deal.

At the closing, you and the seller transfer funds and sign all applicable paperwork to finalize the transaction. Real estate agents, closing agents, attorneys, and mortgage and title representatives may also be present. Our loan consultant will help you prepare for closing, including providing you with an estimate of any closing fees. As part of our competitive service guarantee, we'll close your loan by the agreed upon closing date – or we’ll pay you $500.2

Once the papers are signed and fees are paid, you'll get the keys to your new vacation home.

Get Started Now

Obtaining financing is a critical step in the vacation home buying process. The purchase of a vacation home often requires higher credit scores and more documentation than for a primary residence – especially in the current market.

PHH Mortgage can help you navigate the details and requirements. Ready to get started? Call an experienced PHH Mortgage loan consultant at (800) 210-8849 or begin the application process online.

1 This is not a commitment to lend. All pre-approval requests or applications are subject to complete underwriting review.

2 Approved, conventional, conforming, purchase loans only. Excludes loans for REO, USDA and short sale properties. Void when delayed closing is required by law. Closing date to be mutually agreed upon between customer and us, and customer must provide all required documentation. Void if delays are caused by third-party entities (Appraisal, Title, Verification of Employment, etc.). Request for adjustment under guarantee must be made no later than 48 hours after the loan closing.

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