A lake house in the Poconos. A condo four blocks from the Gulf. A cabin you can rent to skiers from December through March. Whatever the picture looks like, the financing conversation starts the same way: this isn’t your primary residence, and lenders will price it differently because of that.
Second-home mortgages live in a strange middle ground. They carry more risk than a loan on the house you sleep in every night, but they’re nowhere near as risky as a pure rental property, assuming you actually use the place yourself. That middle ground shapes almost everything about the loan: the rate, the down payment, the reserves, and even which programs you’re allowed to use.
What Makes a Vacation Home Loan Different
Lenders sort properties into three buckets. A primary residence is where you live most of the year. An investment property is bought purely for income. A second home, or vacation home, is a property you occupy for part of the year and don’t rent out on a full-time basis.
That distinction drives pricing. Expect to pay roughly 0.375% to 0.875% more in interest than you would on a primary residence loan, along with a higher bar for credit and cash reserves. If you want the full breakdown of how those adjustments work, our guide on how to get a vacation home mortgage walks through down payments, rates, and loan options in detail.
Lenders also apply a short list of ground rules to second homes:
- You must occupy the property personally for some portion of the year
- It can’t be managed by a rental company or tied up in a timeshare arrangement
- It generally needs to be a one-unit dwelling, condo, or PUD
- Most conventional lenders only allow one second home at a time; a third property usually pushes you into investment pricing
Conventional Second-Home Loans: The Default Choice
For most buyers with decent credit, a conventional loan backed by Fannie Mae or Freddie Mac is the simplest route. Here’s what the numbers typically look like:
- 10% down minimum, though 15% to 20% is common for condos in non-warrantable buildings or buyers who already own several financed properties
- 620 minimum credit score, with 680 to 740+ needed for the best pricing
- Debt-to-income up to 43%, occasionally 45% to 50% with strong reserves
- A loan limit of $806,500 in most counties for 2025
- Two to six months of reserves, often more if you own other real estate
- Fixed 15- or 30-year terms, plus ARM options
One detail that trips people up: rental income generally does not count on a conventional second-home loan. Fannie Mae assumes you’re using the place yourself, so you can’t offset the mortgage with Airbnb revenue in your debt-to-income calculation.
When conventional is the right call
You plan to use the property yourself for several weeks a year, your credit is solid, and the purchase price sits under the conforming limit. It’s also the cheapest money you’ll find for a second home.
Jumbo Loans for Expensive Vacation Markets
Aspen. Key West. Lake Tahoe. The Hamptons. These are markets where the median listing runs well past $1 million and a starter cottage costs more than a suburban mansion.
If the loan amount tops the conforming limit ($806,500 in most of the country for 2025, higher in designated high-cost counties), you’re in jumbo territory. The requirements tighten accordingly:
- 15% to 20% down typical, occasionally 10% for very strong borrowers
- 700+ credit score, often 720 or higher
- Six to twelve months of reserves
- A second appraisal in some cases
- Rates that, in today’s market, are often within a quarter point of conforming
Jumbo pricing has gotten competitive enough that the old assumption of a big rate penalty no longer holds. What does hold is the cash requirement. On a $1.2 million Aspen condo, 20% down means $240,000 plus closing costs plus reserves.
DSCR Loans: When the Property Is Really a Rental
Here’s the honest version. If you plan to rent the place out 40 weeks a year and use it two, you’re buying an investment property regardless of what you call it in conversation. Lenders know this, and so does the IRS.
A DSCR loan (debt service coverage ratio) qualifies you on the property’s rental income rather than your personal income. The lender divides the property’s monthly rent by its monthly debt obligation. A DSCR of 1.0 means the rent exactly covers the mortgage; most lenders want 1.10 to 1.25.
- 20% to 25% down
- 660 to 700+ credit score
- Rates roughly 1% to 1.5% above conventional
- One to two points in origination fees is normal
- Short-term rental income accepted in many cases, using a market rent analysis rather than a signed lease
The appeal is obvious. Freelance income, a recent job change, or a debt-heavy balance sheet won’t kill the application. The trade-off is cost, and you should run the numbers on whether the flexibility is worth the premium over a 15-year hold.
VA Loans and the Second-Home Question
FHA loans are off the table for second homes. Those are for primary residences only, with narrow exceptions that rarely apply to a vacation property.
VA financing is more nuanced. The program is built around owner-occupancy, but a veteran with remaining entitlement can sometimes use it for a second home through what’s called second-tier entitlement. In practice you’ll likely need a down payment of 25% of the amount that exceeds your remaining entitlement, and the occupancy certification still applies.
Talk to a VA-savvy lender before assuming anything. The math changes dramatically depending on how much entitlement you’ve already used on a previous purchase.
HELOCs and Cash-Out Refinances
If you own your primary home outright, or have built up significant equity, tapping it can beat a standalone second-home mortgage. A cash-out refinance replaces your first mortgage with a larger one and hands you the difference in cash. A HELOC leaves your first mortgage alone and gives you a revolving credit line you can draw against as needed.
Typical pricing right now runs around 8% to 9.5% for HELOCs, depending on the prime rate and your lender’s margin, and 6.5% to 7.5% for cash-out refinances on well-qualified borrowers.
The upside is no second-home rate premium, a faster close, and, if you buy in cash and then do a delayed financing cash-out, a simpler purchase process. The downside is real: your primary residence now secures the debt. Before you go this route, it’s worth understanding how a primary residence mortgage works and what restructuring it actually costs.
Portfolio and Non-QM Options
Some buyers don’t fit the box. Self-employed with heavy write-offs. Commission income that swings wildly. A credit blip from three years ago. Foreign nationals without a US credit history, a situation covered in our guide to getting a US home loan without a green card.
Non-QM and portfolio lenders fill these gaps with bank statement loans, asset depletion programs, ITIN loans, and foreign national programs. Expect 15% to 25% down for standard non-QM second homes, 30% to 40% for foreign national borrowers, and rates one to three points above conventional.
Side by Side: What Each Loan Actually Costs
- Conventional second home: 10% down, roughly 0.5% rate premium over a primary loan, 620+ credit score
- Jumbo: 15% to 20% down, 700+ score, six to twelve months of reserves
- DSCR: 20% to 25% down, qualifies on rental income, about 1% to 1.5% rate premium
- VA second-tier entitlement: 25% down on the excess, occupancy rules apply
- HELOC or cash-out refi: no additional down payment, but your primary home is collateral
Matching the Loan to Your Actual Plans
Three questions sort this out faster than any online calculator.
Will you rent it out? Under 14 days a year and a conventional second-home loan is fine. Six months a year and you should be pricing DSCR and investment loans, even if you never call the place an investment.
How many financed properties will you own? Fannie Mae caps conventional financing at 10 properties, and pricing adjustments kick in after four. Own several already? A portfolio lender may be the practical answer.
How long will you keep it? If you’re planning to sell in three years, paying two points on a DSCR loan rarely pencils out. If it’s a 15-year hold, the rate premium matters far less than the qualification flexibility.
Mistakes That Cost Vacation Home Buyers Real Money
The most expensive error is claiming a second home is a primary residence to get a lower rate. That’s occupancy fraud. Lenders audit it after closing, and the penalty can include demands for full repayment plus federal charges.
Other common missteps:
- Forgetting reserve requirements when budgeting the down payment
- Underestimating insurance, since coastal wind, flood, and wildfire coverage can run two to four times a standard policy
- Assuming rental income will offset the payment on a conventional second-home loan, because it won’t
- Skipping pre-approval and then losing a bidding war on a property you loved
- Ignoring HOA dues and property management fees when calculating what you can afford
What to Ask Your Lender Before You Sign
Walk in with questions and you’ll get straight answers instead of a rate sheet and a shrug.
- Will you classify this as a second home or an investment property?
- What’s the rate premium compared with a primary residence loan?
- How many months of reserves do you require?
- Can I use projected rental income to qualify, and under which program?
- What are the total points, fees, and prepayment penalties?
A vacation home is supposed to be the fun purchase. Getting the structure right up front, with the right program, the right down payment, and the right reserves, is what keeps it that way instead of turning it into a decade of payments you didn’t plan for. Get pre-approved with two lenders before you make an offer, and compare the loan estimates line by line. The gap between a conventional second-home loan and a jumbo is often a few hundred dollars a month. The gap between either and a misclassified loan is a legal problem.