Of course, buyers of second homes should be aware that they must be able to qualify for both the payments on their principal residence and on the second residence. Sometimes the second home may be rented during periods when not occupied by the owner. This income will not be considered by most lenders until a two year history for such income has been established. Even then only part of the revenue received will be allowed as an offset to the mortgage payment because mortgage lenders commonly discount rental income by 25 percent to allow for vacancy and maintenance. When you rent your second home for part of the year, you are then looked upon as an investor by most lenders.
Seller financing is often an attractive alternative in the second home market.
Many properties offered for sale in recreation and retirement areas are owned free and clear by older people who need income more than they need cash. Therefore, they are often willing to carry a first mortgage on favorable terms in order to supplement their incomes. For example, some sellers will offer 100 percent financing to a buyer with a strong income and credit profile. Such loans are often set up for servicing with a local bank, or the buyer may use his own bank for this purpose. These loans may also be made at half a point or so below market rates.