Your Complete Guide To Getting a Second Home (And What To Do With the First)
If you’re ready to upgrade your living arrangements, then a second home is already on your radar. Here’s everything you need to know.
Maybe you’re looking for a vacation home. Perhaps you need to purchase a home for your parents to stay in. Regardless, you’re looking to buy a second home.
But before you enter the process, you want to get an idea as to what it entails. That’s where this guide comes in. Below, we’re going to tell you everything there is to know about getting a second property, from things to consider, to what to do with your first home, and more.
Let’s get into it!
What to Consider When Buying a Second Home
There are a number of different things to consider when buying a second home. Some of the most important things to consider when purchasing a second property include:
How Often You’ll Use the Home
First, you should consider whether you really need a second home at all. Ask yourself how often you’ll use it. If it’s only going to be used sporadically, you might be better off renting something instead.
Remember that you’ll need to care for your second home so as to keep it in good shape. Not only will you have to spend thousands of dollars every month on the mortgage but you’ll also need to pay thousands of dollars a year on updates. All of these costs added up won’t justify the purchase of the home if you’re only using it from time to time.
Whether You’ll Qualify for a Mortgage
As you might expect, qualifying for a second mortgage is more difficult than qualifying for a first mortgage. The primary reason for this, of course, is that your first mortgage puts a huge dent in your debt-to-income ratio. If your debt-to-income ratio is too high, you won’t be able to secure a second mortgage.
Generally speaking, getting a mortgage requires a debt-to-income ratio of 43% or lower. Make sure to crunch the numbers to determine whether your income will qualify you for a second mortgage.
Whether You Can Realistically Afford a Second Home
Just because you can get a mortgage for a second mortgage doesn’t necessarily mean that you can realistically afford a second home. The last thing you want is to be house poor.
As such, before attempting to secure a mortgage for a second house, you need to sit down and work out a budget. Include all of your monthly expenses and ensure that there is some money left over. Be sure to account for house maintenance on both homes, not to mention retirement savings and the like.
It’s also important to consider the second home’s location. Will its location appreciate in value over the years? Is it in a flood plane? Is the location conducive to doing the things you want to do while staying at the second home?
The location of the home can greatly affect the amount of value that it brings to you. And because you’re buying this residence, you’ll be stuck with its location for years. It’s imperative that you get it right.
How to Get a Second Home
Now that we’ve discussed things to consider when buying a second home, let’s discuss the buying process itself. It generally entails the following:
Get Mortgage Pre-approval
First and foremost, you’re going to need to get pre-approved for a mortgage. This will not only help you ensure that you’re eligible to buy a second home but will also give you leverage during the bidding process.
If you already have a first home, you’re likely well aware of how to get pre-approved for a mortgage. If not, you must simply find a lender, submit financial documents, and wait for a response. You can find lenders online by Googling “mortgage lenders” or even by asking your local bank.
Locate a Suitable Real Estate Agent
It’s certainly possible to buy a home without the assistance of a real estate agent, especially if you’ve been through the process before. That said, it’s not advised. Buying a home is a long and strenuous process and is not easily taken on by a person with a full-time job and responsibilities of their own.
Real estate agents, on the other hand, are specifically dedicated to facilitating the home-buying process. They have not only the resources needed to carry out the process but the time as well. This is imperative, as it enables them to place great focus on the needs of their clients.
A real estate agent will not only carry out the financial aspects of the home-buying process but they’ll also help to locate potential homes as well. This can make a substantial difference when it comes to finding the right residence.
You can find a real estate agent by simply Googling “real estate agents near me”. Or, if you’re in the Seattle area, you can simply contact us here at Verraterra.
Search for Your Home
Now that you have a real estate agent, you can start searching for your home. There are a number of ways to go about doing this. In addition to using sites like Zillow, you can also use your real estate agent’s house listing program.
Of course, there’s also the option to go for a drive and search for “for sale” signs. Not all houses get listed on listing sites. In some cases, searching for these houses in person can result in striking good deals.
When searching for your home, be sure to have your desired criteria set. Know approximately how many bedrooms you’d like, how many bathrooms you’d like, the square footage, and other such metrics.
Submit an Offer
Once you’ve found the home that you like, you should submit an offer. The price of this offer will depend on a variety of circumstances, including the home’s listed price, whether there are other people trying to buy the home and more.
Your real estate agent can assist you through this process. They have extensive knowledge of what the offer submission process entails and will be able to help you choose an offer with a high success rate.
Close on the Home
Your offer has been accepted. Now, all that’s left to do is close on the home. This is a fairly complex process and is best handled by an experienced real estate agent.
During the closing process, you’ll need to have the home inspected, purchase title and homeowners’ insurance, schedule an appraisal, and facilitate a number of other important components of the home-buying process.
Generally speaking, the closing process lasts between 30 and 45 days. That said, complicating factors can cause this range to extend.
What to Do With Your First Home
Now that you’ve bought a second home, you might have less use for your first home. If so, there are a number of things you can do with it in order to justify keeping it. Some of the most common things to do with a first home after a second home purchase include:
Rent It Out
If you’re not going to be living in your first home at all, or if you’re going to be spending long blocks of time outside of it, you could rent it out. Families are always looking for homes to rent, especially in this area. Of course, there’s also the option to put the home on Airbnb for select dates.
If you’re going to do this, you should strongly consider utilizing the services of a property management company. They’ll help find tenants for your home, all the while maintaining it, handling rent payments, and more.
Another thing you can do to make money from your first home is to provide storage space. There are plenty of people out there who would pay you a monthly fee in order to store various items in your residence. For instance, someone might pay you a few hundred dollars a month in order to store their car in your garage.
All you have to do is advertise on social media. With time, you’re almost certain to attract interested parties.
Create a Suite
Maybe you’re only going to be partially using your first home but will still be there on a regular basis. If so, you could consider turning the other part of it into a suite for rental purposes.
You could, say, close off half of the home and effectively turn it into a duplex. Or, you could turn the basement into a completely separate living space. The options are many.
Again, if you’re going to do this, you should consider hiring a property manager. This will lighten the load when it comes time to rent the suite out.
Need Help Managing Your First Home?
If you’re buying a second home, you might very well be interested in renting out your first home. If so, and if you need property management services to assist in the management of that home, we here at Verraterra are the people to see.
We’ll handle all aspects of the management process, from finding new tenants to maintaining the property and more. Learn more about our property management services now!