Do You Need to Reside in a House to Qualify for Loans Against it?

While it can be more difficult to qualify for loans on a house that is not your primary residence, it is still possible in some circumstances to do so. However, you may ultimately end up with a loan whose terms are not as favorable as a loan secured by a primary residence, and you may have to provide more documentation to a lender than you normally would.

Second Homes or Vacation Homes

In general, lenders consider borrowers who are seeking to finance a second or vacation home to be more affluent than the normal borrower, with more ability to repay the loan. However, borrowers with two mortgage payments are necessarily stretched thinner in terms of required monthly payments; as a result, then, a mortgage loan secured by a second or vacation home may carry a higher interest rate than a mortgage loan secured by a primary residence.

Rental Properties

If your second home is actually used as a rental property, some lenders may refuse to use the property as collateral for a loan at all. Due to the difficulties in reselling a rental property in the current real estate market, as well as the fact that the rental property may not be in as good of a condition as a primary residence, you may have trouble finding a lender to meet your loan needs. However, if you can show a lender your ability to generate a cash flow from the rental or investment property, you may be able to qualify for a loan secured by that property.

A Real Estate Attorney Can Help

If you are having difficulty in obtaining a loan secured by a second home or rental property, you may wish to consult a real estate attorney for advice. A real estate attorney can best advise you as to your loan options and possible consequences of taking on these loans.