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Buy A Vacation Home

Considering purchasing a vacation home?

Let us help you plan for what's ahead so you have the information you need to make informed decisions about your home options.

If you’re dreaming about vacation homeownership near your favorite location, you’ve come to the right place for financing information and tips.
Wells Fargo is ready to help you through every stage of homeownership — as you plan to buy, when you purchase, and even after you own your vacation home. From your mortgage application to enjoying your new vacation property, Wells Fargo is with you — every step of the way.

What are the benefits of vacation homeownership? Show Details

 
Having a place to stay near the beach, the lake, the mountains or your favorite resort area offers many potential rewards. When you buy a vacation home, we can help you understand the financial and personal benefits that go along with the purchase, including:

  • Rental opportunity. If your home is in a popular vacation spot, you may be able to rent it and earn additional income when you’re not using it.

  • Ongoing income and cash flow. If you choose to rent your vacation home, it could provide ongoing income to offset your expenses, and may provide tax benefits in the form of depreciation expense. Restrictions apply. (Consult your tax advisor regarding the deductibility of depreciation expense.)

  • Potential tax benefits. Mortgage and home equity interest payments and property taxes may offer the opportunity for tax advantages. (Consult your tax advisor regarding the deductibility of interest.)

  • Potential property appreciation. A vacation home may be a good long-term asset to hold as homes can increase in value.

What should I consider before purchasing a vacation home?Show Details

 
There’s more to buying a vacation property than having a place to relax. Whether you purchase a single family home, townhome or a condominium—there are some items you should consider:
Additional financial responsibilities
  • Consider whether you will occupy your vacation home as a second home exclusively or if you plan to rent it out to others, when you’re away. You may need to install an owner’s closet, provide furnishings or safety features with future renters in mind.
  • Home values can fluctuate and will change over time. This means property values can decrease. Every community and situation is different so it is important to keep this consideration in mind.
  • You may have other expenses in addition to your monthly mortgage payments on the property — such as homeowners association dues, cleaning services, flood insurance, and utilities.
  • Carefully consider your monthly cash flow to ensure that you’re able to manage the additional expenses.
  • You will need to calculate the amount needed for closing costs and associated expenses (such as repairs, cosmetic improvements, and furnishings for your vacation home).

If you purchase a home that needs renovation, finance and renovate with ease
  • If your vacation home needs repairs, ask about our Purchase & Renovate SM loan, which may enable you to buy and repair with one loan.
  • Another streamlined way to purchase and renovate your home is the Wells Fargo Mortgage plus Home Equity Financing program. This option combines a Wells Fargo first mortgage together with home equity financing. There may be tax benefits and reduced closing costs with this option. (Consult your tax advisor regarding any tax benefits.)
  • Depending on the loan you choose, remodeling and repairs may require hiring a contractor.

Is owning a vacation home less expensive than hotel stays or renting?
  • Depending on the amount you spend on accommodations, owning a vacation home may be less expensive in the long run. You may decide to rent your property out while you’re away, which could generate additional income.
Help ensure your vacation home is restful and enjoyable by carefully thinking through these considerations.

How can I use my current home’s equity to buy a vacation home?Show Details

 
Whether you are looking for a home-away-from home for family vacations — or a rental property to help generate income — our home equity financing options can help you reach your goals.
Gears iconCalculate Rates and Payments
 
Responsiveness
  • If you have sufficient equity in your current home, you may be able to purchase your vacation home outright and avoid an additional first mortgage by getting a home equity loan or line of credit.
  • The average time varies, but generally a home equity loan or line of credit can close within 20 to 45 business days.
Reduced costs
Using a home equity loan or line of credit from Wells Fargo may be an option that helps you reduce your costs:
  • You can use your current home’s equity to make a down payment of 20% and avoid paying private mortgage insurance on your new property.
  • By leveraging home equity, you may be able to contribute a larger down payment and lower the monthly mortgage payment on your vacation property.
  • Our home equity financing allows you to select the closing cost option that meets your needs.1
  • The interest on home-equity financing may be tax deductible. (Consult your tax advisor on the deductibility of interest.)

How will you evaluate my mortgage application?Show Details

 
When your application is complete, we review the following four components:
Income:
  • Do you have a reliable, continuing source of income to make monthly payments?
  • Income can come from primary, second, and part-time jobs, as well as overtime, bonuses, and commissions.
  • You may use other sources of income if you want them considered for payment – including retirement or veteran’s benefits, disability payments, alimony, child support, and rental or investment income – provided they can be verified as stable, reliable, and likely to continue for at least three years.
Learn more about establishing and improving your credit
 
Current debts and credit history:
  • Do you pay your bills, loans, credit cards and other debts on time?
  • We examine your payment habits before deciding to loan you money.
  • Your credit history and credit score are also examined prior to deciding to loan you money. Wells Fargo also offers a series of online credit education videos.
  • It's a good idea to check your credit history and correct any problems before applying.
Assets and available funds:
  • Do you have enough funds for a down payment and closing costs?
  • You may use funds from a savings account, certificate of deposit (CD), investments, and retirement fund.
  • In some cases, you may be able to use gift funds toward closing costs and all or part of the down payment.
  • In many cases you will also have to demonstrate that you have additional funds in your accounts to cover several months of mortgage, tax, and insurance payments.
The property
  • What is the market value of the property you want to purchase?
  • We will order a property appraisal to make sure your property’s value meets our underwriting requirements.
Responsible lending guidelines
We approve applications where we believe the borrower has the ability to repay the loan or line of credit according to its terms. We use two ratio-based guidelines to evaluate your ability to repay.
What is debt-to-income ratio? Debt-to-income ratio is the percentage of your monthly income that is spent on monthly debt payments.
 
What is housing-to-income ratio? Housing-to-income ratio is the percentage of your monthly income that is spent on monthly housing payments.
 
Debt-to-income ratio:
  • Your expected monthly mortgage payment (principal, interest, taxes, and insurance) plus your other monthly debt obligations to your gross (pre-tax) monthly income are compared.
  • Mortgage program guidelines vary, but a good rule of thumb is to keep your total debt level at or below 36% of your gross monthly income.
Housing-expense-to-income ratio:
  • We also compare just your expected monthly mortgage payment (including taxes and insurance) to your gross monthly income.
  • Mortgage program guidelines vary, but a good rule of thumb is to keep your housing expense level at or below 28%.
How to calculate your ratios

Even if you fall within the 28%/36% rules of thumb, make certain that you feel comfortable making your monthly mortgage, insurance and tax payments and the payments on all your other monthly obligations. Homes have other costs — such as utilities, maintenance and repairs — that may not exist if you rent.

What basics should I understand about home loans?Show Details

 
Obtaining a mortgage to help buy your vacation home means you will repay more than you borrowed. How much you repay is determined by several factors. Here are the terms you should understand:
Interest Rate
  • The interest rate is the percentage of your loan amount we charge you to borrow money to buy your home.
  • Interest rates are based on current market conditions, your credit score, down payment, and the type of mortgage you choose. Check today’s rates.

Discount points
  • One point equals 1% of your mortgage amount.
  • If you qualify, you may be able to pay one or more points to lower your interest rate. A lower interest rate means lower monthly mortgage payments.
  • Points are usually tax deductible. (Consult a tax advisor on the deductibility of interest.)

Origination charge
  • The amount that includes all charges (other than discount points) that all loan originators (lenders and brokers) involved will receive for originating the loan.
  • This charge covers items including fees, document preparation, and underwriting costs, and other expenses.

Loan term
  • Your loan term is the amount of time you have to pay off your mortgage balance.
  • Shorter loan terms typically mean higher monthly mortgage payments, but often have lower interest rates. And if you pay off your mortgage balance within a shorter term, you may pay less in total interest than with a longer-term mortgage.
Remember that interest rates only tell part of the story. The total cost of a mortgage is reflected by the interest rate, discount points, and origination charges. This total cost is known as the annual percentage rate (APR), which is typically higher than the interest rate. The APR enables you to compare mortgages of the same dollar amount by considering their total annual cost.
What is PITI? PITI stands for the four elements that make up most mortgage payments: Principal, Interest, Taxes, and Insurance.

Your monthly mortgage payment is typically made up of four parts:

  • Principal is the amount of money you borrowed.
  • Interest is the cost of borrowing the money.
  • Taxes are the property taxes charged by your local government. Typically we collect a portion of these taxes in every mortgage payment and hold the funds in an escrow account for tax payments made on your behalf as they become due.
  • Insurance refers to homeowners or hazard insurance that provides protection against property damage due to wind, fire or other risks. Like taxes, insurance costs are typically collected and paid from an escrow account.
View loan options now.

Depending upon your property location, property type and loan amount, you may incur other monthly or annual expenses such as mortgage insurance, flood insurance, and homeowners association fees.
 

How can I get started?Show Details

 
Your reasons for buying a vacation property are varied but, ultimately, you hope to enjoy the space and perhaps have the option to generate rental income. To increase the chances for a successful start, you should gain control of your finances, know your buying power, have an overall financial strategy, and knowledge of the area where the property is located.
Your down payment may come from several sources — including the equity in your current home, and any personal savings you have built up in bank or investment accounts. You can also prepare by:
Creating a financial plan

Estimating what you can spend
  • Calculate your monthly payment.
    • Use our payment calculator to estimate payments for various mortgage amounts and interest rates.
  • The total amount you need is the sum of your down payment and your closing costs
  • Estimate the proceeds from the sale of your current home that can be used to buy your new home
  • If you have less than 20%, you will need private mortgage insurance (PMI) which protects the lender if a borrower stops paying the mortgage.
  • Closing costs and prepaid expenses are also a necessary part of getting a mortgage.

Setting a time frame
  • Determine when you’d like to buy your home
    • Take into consideration your credit, cash flow, and savings.

How do I estimate what I might be able to borrow?Show Details

 
We offer different ways to estimate how much you may be able to borrow. When you know how much you expect to borrow, you can estimate a price range before you begin looking for a home.
  • A free mortgage prequalification lets you estimate how much you can borrow, based on basic financial data you provide.2
  • A preapproval letter tells a REALTOR® and seller that you’ve been preapproved for a specific amount based on a preliminary review of your credit information.3
Graph iconBuying a vacation house?
Estimate how much you may be able to borrow.
 
What is the difference between a prequalification and a preapproval? Prequalification provides a ballpark loan estimate with no credit check and no fee. A preapproval provides a preliminary credit review with a credit check and a fee.
 
Preapproval is not a commitment to lend. A commitment is contingent on verifying application information, satisfying all underwriting requirements and conditions, and an acceptable property appraisal and title.
Verification of this information, satisfying underwriting conditions, plus a satisfactory title search and appraisal are required for final loan approval.
Remember: Neither a preapproval nor a prequalification obligates you to borrow from Wells Fargo.
How can I benefit from a preapproval?
  • You can identify and address possible qualification problems early in the homebuying process.
  • Obtaining a PriorityBuyer® preapproval tells real estate agents and home sellers that you have been preapproved for a specific mortgage amount.3 Real estate agents and sellers increasingly rely on preapprovals to identify serious offers.
  • Provides an advantage over buyers who are not preapproved.
  • Adds to your negotiating strength when you are ready to make an offer on a home.
  • Lets you shop confidently because you know how much you may be able to borrow.
  • May allow for a faster closing, since much of the loan work is already completed.
First-time homebuyers can benefit from preapproval in the following ways:
  • Without a record of previous mortgage payments, a preapproval can help you feel much more confident pursuing your first home purchase.
  • A preapproval shows the seller that a lender has already run the numbers and is willing to proceed with the mortgage.
How does the process work?
  • If you’re still in the early stages of house-hunting and want to know roughly about how much home you can buy, request a free mortgage prequalification.2
  • If you’re ready to move forward, line up your financing ahead of time with a PriorityBuyer® preapproval, which requires a credit check and a completed mortgage application.3
  • Work with us online, over the phone, or in person with a local consultant.
Have questions or need help? Our home mortgage consultants are available to help you throughout the home financing process.

How can I find a vacation home that meets my needs?Show Details

 
When you are ready to look for your next home, you can receive valuable information and assistance by working with a real estate agent to locate properties for sale that meet your needs. You may want to keep these basic steps in mind:
Preparation
  • Easily assess what features you want in your home with this homebuying wish list.
  • If you aren’t already working with a real estate agent, your home mortgage consultant can provide you with information to contact real estate agents in your area. Real estate agents make it their business to know about communities and the homes within them.

Location
  • Location is as important as appearance or size.
  • Do you need to be in a particular school district, close to a job, public transportation, or day-care facility?
  • Although no one can predict the rise and fall of property values, talk with your real estate agent about the trend in the area’s purchase prices over the years.

Needs and wants
  • Consider desired features and amenities of your new home. For example:
    • How many bedrooms and baths do you need?
    • Do you need central heating or air conditioning?
  • Separate “wants” from “needs” and prioritize your list.
  • Prioritize each item and look for a home with the most important features.

Types of homes
  • A single-family home is just one of your options.
  • Condominiums, town homes, and co-ops all offer different lifestyle and ownership features.
    • Be sure you budget for monthly fees for garbage and snow removal, landscaping, and similar services charged by these communities.
  • Consider newly built homes in addition to existing homes.

Sometimes finding your ideal home involves compromise. You may want to consider “a diamond in the rough” – a place you can transform with a bit of ingenuity or some renovations. Ask a home mortgage consultant about our Purchase & Renovate SM loan, which simultaneously funds purchase and repairs.
Your real estate professional and home mortgage consultant will work together to help make buying your first home a rewarding experience.
Benefits of working with a REALTOR®
Not every real estate agent is a REALTOR®. What’s the difference?
According to the NATIONAL ASSOCIATION of REALTORS®, the term REALTOR® identifies a real estate professional who is a member of the association, and who subscribes to its strict Code of Ethics. Some of the benefits of working with a REALTOR® include:
Professional assistance and representation
  • Whether you’re buying or selling, a REALTOR® may be able to help you navigate the transaction more smoothly.
  • These trained professionals can make suggestions about what may seem like a complicated process.

Marketplace experience
  • A REALTOR® can assess the market — house-by-house, street-by-street — with access to up-to-date information that you may not have.

Buyer’s advantage
  • A REALTOR® who understands your property and location needs can use his or her network to gather first-hand information on upcoming homes for sale.

Seller’s advantage
  • Selling your home is a huge undertaking, especially when it comes to accurate pricing and bringing in qualified buyers. You may benefit from seeking the assistance of an experienced REALTOR®.

What can I expect during the rest of the homebuying process?Show Details

 
Making an offer
Your REALTOR® can help you determine the appropriate amount for your initial offer based on comparable home sales, market value, condition of the home and your closing date.
When you make the offer, consider these tips:
Put your offer in writing
  • Negotiations should not be handled verbally; writing ensures understanding between the parties.
  • If you do negotiate verbally, follow up in writing.

Have your preapproval for maximum leverage
  • A preapproval tells real estate agents and home sellers that you have been preapproved for a specific mortgage amount.
  • Real estate agents and sellers increasingly rely on preapprovals to identify serious offers.3

Submit a deposit
  • This “good faith” deposit demonstrates commitment to the transaction.

Finalize your purchase contract
  • The contract is a legally binding contract between the buyer and seller describing all the terms of the transaction.
  • Depending on which state you live in, an attorney, real estate agent, or title company may help negotiate and draft the contract.
  • See what purchase contracts typically include.

Next steps

Wells Fargo’s Learning & Planning Center can help you understand all the steps of the home financing process.

For your mortgage needs:
1-877-937-9357
For your home equity needs:
1-888-667-1772

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Bank Closing Costs

 
Wells Fargo Home Equity accounts are free of origination fees, and fees for the application, appraisal, and another bank charged fees.

Depending on your state, you may be responsible for mortgage taxes, attorney fees and other third-party fees.
 
 
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Total the amount of your savings

 
How much you could put toward a new home, down payment and closing costs using:
- savings and money market accounts
- stocks and bonds
- certificates of deposit
 
 
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Specific mortgage amount

 
Based on a preliminary review of your credit information.
 
 
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Closing cost option

 
Most home equity financing offers two options:
Have us pay your closing costs
  • You pay a higher interest rate to cover all required third party costs
  • This option is not available for lot loans or financing greater than $500,000
Pay your closing costs
  • You pay a lower interest rate
  • Pay with your loan proceeds, line of credit, or a check

For details, please call 1-888-421-4672.
 
 
 
1
The home equity line of credit Annual Percentage Rate (APR) is variable and is based on the highest Prime Rate published each day in The Wall Street Journal Money Rates Table (the "Index"), plus a margin. The index as of the last change date of December 17, 2008, is 3.25%. As of April 11, 2014, current margins for lines of credit from $20,000; maximum $500,000 secured by owner-occupied properties with 70% combined loan-to-value range from 3.750% to 0.375% resulting in corresponding variable APRs ranging from 7.000% to 3.625%. For larger loan amounts, please contact us. Minimum APR is 1.00%; maximum APR is 18%. APR does not include costs. Your APR will be based on the specific characteristics of your credit transaction, including evaluation of credit history, CLTV, property type, amount of credit, term and geographic location. There is a $75 annual fee which is waived for the first year. If provided for in your original contract, the fee will be waived thereafter if you maintain a minimum average daily balance of $20,000 or more for twelve consecutive months previous to the annual fee assessment date. The prepayment penalty fee will be $400 for lines of credit $20,000 or greater. Opening fees may be paid to Wells Fargo, its affiliates or third parties and range from $19 to $9,000 depending on the property type, the state in which the property is located and the amount of credit extended and include applicable state or local mortgage taxes. This Account has a Draw Period of 10 years plus 1 month, after which you will be required to repay any amounts within a 15- or 20-year term, depending upon your account balance. Hazard and, if applicable, flood insurance required.
2
A prequalification lets you estimate how much you can borrow to buy a home, does not require a credit check, and is not a commitment to lend.
3
A PriorityBuyer® preapproval is based on our preliminary review of credit information only and is not a commitment to lend. We will be able to offer a loan commitment upon verification of application information, satisfying all underwriting requirements and conditions, and providing an acceptable property, appraisal, and title report. Preapprovals are subject to change or cancellation if a requested loan no longer meets applicable regulatory requirements. Preapprovals are not available on all products. See a home mortgage consultant for details.
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