The number of people investing in second homes across the US is on a steady rise. In 2013, a report by Jodi Helmer of the Huffington Post showed the number of people buying a second home between 2011 and 2012 was 10 percent higher compared to that of the previous year. The median price of properties in the same period also rose by a staggering 23 percent to $150,000.
For most people, the idea of purchasing a second home may come later in life when one is financially stable. Most people looking to invest in a second home are often driven by the need to find a vacation home or an alternative source of income. The procedure followed when purchasing the first and second homes are all same. According to CNN Money, the key factors to consider when investing in a second home include:
1. Credit report
The three major national credit agencies tasked with providing credit report are TransUnion, Experian and Equifax. These agencies will reveal any underlying issues in your credit history. This is an important step because a low credit score can hurt your chances of getting financing or good interest rates.
2. Keep a budget
Before you invest your money on any property, you need to establish how much money you are ready to Part with. An online calculator can help you do the math. Some of the factors to consider when setting a budget include your level of income, amount of debt and the type of loan that corresponds with your income bracket. According to most experts, the cost of a new home should be around 2 ½ times your gross yearly salary.
3. Perform a good Search
When you are searching for a home, always look at factors such as the location of the city or neighborhood and the economic activity, average income and levels of unemployment in the area. Once you have zeroed in on the property, you need to move quickly and make an offer.
4. Use a buyer agent
Finding an agent who can help you find a property is fairly easy because most home owners use agents to sell their properties. When the seller finds a buyer, he or she gets a commission from the sale. For this reason, it is important to find a buyer friendly agent.
5. Line your cash
Once you have made up your mind about the property. You need to put up a down payment and all associated closing cost for the property. During this stage, you can apply for a loan from organizations that allow low down payments on mortgages. These organizations include Freddie Mac, Fannie Mae, the Federal Housing Administration, various banks and mortgage firms.