ORLANDO, Fla. – Feb. 20, 2013 – Qualifying for a loan isn’t easy for most borrowers nowadays, but it’s particularly difficult for vacation-home buyers who find tougher underwriting requirements and other obstacles.

“Many popular vacation-home destinations are in the same markets where property values tanked during the housing downturn and have yet to stabilize,” MarketWatch reports. “Some lenders say they’re concerned about underwriting mortgages in areas where prices could fall further. In other cases, lenders won’t approve mortgages if they receive a shaky appraisal report – for instance, one that includes sale prices from other towns when there’s a lack of comparable transactions in the neighborhood the applicant is buying into.”

Lenders also weigh the financial health of a homeowners’ association, if applicable, and they’re more apt to deny a loan if many existing neighborhood owners are behind on their dues, or if there are several homes unsold in the area even if the borrower has stellar credit.

Lenders are even less willing to provide private jumbo mortgages – loans above $417,000 in many parts of the country – on vacation homes.

Lenders are also more strict with vacation-home buyers, passing on higher mortgage rates – perhaps a quarter of a percentage point higher –compared to those applying for a loan to buy a primary residence. Lenders may also require larger downpayments than they would on a primary residence; in some cases, that can range from 30 percent to 60 percent.

But with prices in many markets still at affordable levels and mortgage rates so low, buyer demand is up for vacation properties. To avoid obstacles, more buyers today bring cash to the deal.

Source: “Getting a Vacation-Home Loan: No Day at the Beach,” MarketWatch (Feb. 8, 2013)

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