Loan limits will likely go up to $625K in 2022, but FHFA hasn’t announced it yet. Still, higher home values have convinced some lenders to boost loan limits now.WASHINGTON –
Some Buyers Purchase a Second Home First ☘ Hoey Team ☘ eXp Realty Florida
Dated: January 15 2020
Some first-time buyers are opting to buy the vacation home before their first home. They’re being priced out of their current area—such as in cities like New York and San Francisco—so they’re opting to buy a vacation home in more affordable towns.
“I’m seeing this more and more,” Svetlin Krastev, an investment advisor with Black Sea Gold Advisors in Kingston, N.Y., told CNN.com. “People want to have exposure to real estate, but it would take all of their assets to get a residence in the city.”
For example, Bart Higgins rents a four-bedroom converted warehouse in Brooklyn, N.Y., with his wife and twin five-year-old children. They pay $5,300 a month. The property would cost between $2 million to $3 million to buy. So the couple purchased a vacation home near Kingston, N.Y., a unit with three buildings on 33 acres with a lake. They bought it for $300,000.
“We bought our first home as a second home as a way to relieve the pressure and buy us some time,” Higgins told CNN. They use Airbnb to offer short-term rentals of the property to help supplement expenses when they’re not there.
Financial planners, however, warn that buying a second home first could take up all of a person’s assets and delay them from being able to purchase a “first” home or a main residence. “Having a loan commitment on a second home will make it that much more difficult to buy what will be used as a first home,” JP Geisbauer, a certified financial planner at Centerpoint Financial Management, told CNN.
Others disagree and say that for urban professionals, it can pay off buying the second home first. A smaller mortgage on a vacation home may be more manageable than a larger mortgage in the city. Also, “the ability to rent out the property easily on home sharing sites makes it a more affordable way to grow equity,” Malissa Marshall, a certified financial planner with Soaring Wealth, told CNN.
Article content from NAR REALTOR Newsletter Magazine, (National Association of REALTORS), and from other sources including CNN and Soaring Wealth
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