15 vs. 30-Year Loan: Which is right for me?

What’s the deal with 15 and 30-year mortgage loan rates? If you’ve ever shopped around for a new mortgage, you’ve seen lenders advertising rates for both. There are pros and cons to both, depending on what you want to do with the mortgage. But there’s also the unknown fact that “15 to 30” aren’t the only term options. Which is right for you? Well, it depends.

What stage are you in life? Are you just starting a family? Are your kids going off to college and suddenly you’re an empty-nester with too much space? The key to determining which loan will work best for you is finding out how much is in your budget and what fits your life phase. When sitting down with one of our loan consultants, it’s important to let them know what your life goals are so they can help match up a loan term that fits your lifestyle.

15-Year Loan

A 15-year loan has one advantage over a 30-year loan no matter what: less interest paid over time. Because of the nature of the loan, you’ll pay it off faster, so you wind up paying a lot less interest over time. The caveat is that the payments are going to be higher each month. A 15-year loan will tighten your wallet until it’s paid off, but it’ll be paid off in half the time.

How much is the difference between the two terms? If you use our mortgage calculator and put in a mortgage worth $150,000, the interest at the end of the term for 15 years is about $61,000 (at 4.875% interest.) That same loan, when the term is changed to 30 years, more than doubles to about $135,000 dollars in interest over the life of the loan.

30-Year Loan

So, why would anyone want a longer term loan? For starters, the payments for 15 years, using the same scenario, is about $1,200 month. That same loan, at 30 years, only requires about $700 dollars a month.

A 30-year term is great for the home of your dreams. If you have no desire to leave that home, or downsizing and retirement are decades away, a 30-year loan is probably the best option. Although you pay more money overall, it gives you more flexibility during the time of the loan.

One common misconception about these loan terms is that 15 or 30 are the only options. Through Riverbank Finance, you can secure a loan for 15 to 30 years or somewhere in between. That’s right! So, for example, if you’re retiring in 25 years, you could set a 25-year term so your home is paid off right in time for retirement. For Riverbank Finance, it’s all about customizing your mortgage to fit the lifestyle you desire.

For more information, or to speak with a loan officer, call Riverbank Finance at (800) 555-2098 to schedule an appointment.

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Can you have more than one VA Loan?

If you have a Veterans Affairs (VA) Loan on your first home and are thinking about buying a second or third property, you can get more than one VA Loan. This is called second-tier entitlement.

The federal government has provided veterans and military personnel with the VA Loan so they can come back to the United States and purchase a home with no down payment. That’s much better than having to come up with a 20% down payment for a conventional loan on a second home, so you should take advantage. Here’s how it works:

Michigan has a county loan limit of $424,100 for VA Loans. The VA provides borrowers with a 25% guaranty on their loan, which, in Michigan’s case, would be a maximum of $106,025. If you already have a VA Loan on your first house, the guaranty provided to you would be subtracted from the maximum amount.

Let’s say you bought a $200,000 primary home with a VA Loan and you want to buy a second home in Michigan with a VA Loan. Let’s figure out the math on this.

$424,100 X 25% = $106,025 maximum guaranty

$200,000 X 25% = $50,000 guaranty and down payment required

$106,025 – $50,000 = $56,025 maximum guaranty allowed on second home

$56,025 x 4 = $224,100 maximum price of second house

Basically, if you bought a $200,000 home in the state of Michigan using a VA Loan, the VA would have guaranteed $50,000 toward your down payment. If you want to buy a second home in Michigan with a VA Loan, you can buy one that is a maximum of $224,100 with no down payment. If your second home costs more than that, you will have to add some money for the down payment.

Let’s say the second home you’re considering is $300,000. The 25% entitlement on that house would be $75,000, putting you $18,975 above the $56,025 maximum guaranty. That means you would have to add a down payment of $18,975 to be able to purchase the second home for $300,000 with a VA Loan.

VA Loans are typically more lenient than other types of loans. If your first home was foreclosed, you can still get a VA Loan on your second home. Riverbank Finance can help you find out how much of the VA’s 25% entitlement you still have left to use.

Whether you’re purchasing a second home you can rent out or a cottage up north that you and your family can enjoy, we can help. For more information, call Riverbank Finance at 800-555-2098 to set up an appointment with one of our loan officers.

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New Income Guidelines for USDA Loans

Although it may not be as well known as the FHA, one of the most popular ways to get a zero down-payment mortgage is the USDA Guaranteed Loan. This loan is specific to rural areas. So if you are looking for a home with wide-open spaces in the country, you may want to consider this loan. The income requirements for the USDA Guaranteed Loan have changed this year, making it easier to qualify than ever.

Even if your desired locale doesn’t look all that “rural,” your location could still qualify. Roughly 70% of America could be categorized as “rural.” 

Use our USDA Mortgage Calculator to estimate home loan payments.

2017 USDA Loan Requirements

First and foremost, the home in question must be in a region that qualifies as rural, according to Rural Development. While the map does give a general guideline for what regions qualify, it isn’t set in stone. So be sure to check with Rural Development yourself.

The second major qualification is to make sure you are under the income limit. For example, in Grand Rapids, MI, a family of four, with two parents and two kids, needs to have a maximum income of $78,200 annually to qualify. Other parts of West Michigan may have different income levels, so be sure to check the USDA income calculator and with our mortgage specialists  to find out whether you qualify.

Lastly, the USDA Guaranteed Loan has other standard requirements including, the borrowers cannot own other real estate, minimum credit score, maximum debt to income ratios etc.

USDA Loan Benefits

Unlike the FHA Loan, you won’t have to pay private mortgage insurance (PMI) with the USDA Guaranteed Loan. That is a major benefit to this loan program. You will, however, have to pay a premium fee to help guarantee the loan. The good news is, the rate for the fee is significantly lower than the cost of PMI through an FHA Loan.

Additionally, The USDA Guaranteed Loan is much more lenient than other loans, making it the perfect option for first-time homebuyers, low-income earners, and those with lower credit scores. The USDA Guaranteed Loan requires no down payment for first-time homebuyers. It is also much more flexible than traditional loans with regards to credit, foreclosures, and bankruptcies.

Typically, a bankruptcy requires a 7-year period before a borrower can apply for a new loan and 4 years for a foreclosure. With a USDA Guaranteed Loan, a borrower only needs to wait 2 years after a foreclosure and 3 years after filing for bankruptcy before they can get approved for a home loan. Borrowers can qualify for a USDA Loan with a FICO score as low as 600.

Call Riverbank Finance at 1-800-555-2098 to schedule an appointment with a mortgage loan officer to find out whether the USDA Guaranteed Loan is the right fit for your financial needs.

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Invest in Property with a Minimum Down Payment

Two weeks ago, we discussed how first-time home buyers and those with little money could buy a house with a small down payment. For those of you who have a large savings account and excellent credit, here are some options for investing in property, whether it’s a new home or a second home, with a minimum down payment.

Conventional Mortgage Down Payments

Conventional mortgages are best for those with perfect or near-perfect credit. If you have at least 20% down payment, you can avoid paying for PMI (private mortgage insurance). The federal government does not guarantee or insure this kind of loan, and it’s limited to loans up to $424,100. Those buying multi-unit homes can qualify for larger loans, though. The minimum down payment required for a conventional mortgage is 3%, although Riverbank Finance allows you to put down as little as 1% (see Conventional 1% Down Mortgage).

Jumbo Loan Down Payment

A loan of more than $424,100 is called a Jumbo Loan, according to Fannie Mae’s guidelines. Most banks do not have jumbo mortgages, but Riverbank Finance specializes in it. There are many options for jumbo loans, including a 40-year fixed rate, 30-year fixed rate, 15-year fixed rate, 3/1 Jumbo ARM, 5/1 Jumbo ARM, 7/1 Jumbo ARM, and an interest-only Jumbo Loan. You will need at least 10% down payment to qualify for most jumbo loans, although 20% is encouraged. However, if you’re buying a home in a high-cost area, such as Hawaii, California, Alaska, or Guam, you may not need a jumbo loan at all.

Vacation Home Down Payment

If you want to invest in a vacation property for personal use, Riverbank Finance allows for a minimum 10% down payment, although you can waive PMI with a 20% down payment. The requirements are a bit stricter here: You can’t have any recent foreclosures or bankruptcies, you must provide documented banking or retirement assets, your DTI (debt-to-income ratio) is limited to 45%, and the property you’re considering needs to be in acceptable condition.

Investment properties Down Payments

If you want to buy investment properties to rent to other people, you will need to have at least 20% down payment with Riverbank Finance. Your total DTI cannot exceed 45%. Freddie Mac requires you to have at least two years of landlord experience, documented in your tax returns, to consider any projected rent as your income. However, Fannie Mae does not. You must buy the property as an individual, not an LLC, and you cannot receive any amount of the down payment as a gift. You will also need at least six months’ worth of house payments reserved in savings to qualify.

For more information or to speak with a loan officer about any of these mortgage options, call Riverbank Finance at (800) 555-2098.

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Loans for Veterans

Three years after the Civil War ended, Memorial Day was established to honor our veterans on the last Monday of May every year. But that’s not the only thing the US Government has done for veterans. Started in 1944, the VA Loan program makes the burden of getting a mortgage easier for qualifying veterans and surviving spouses.

No Down Payment Mortgage

One hurdle home buyers often face in getting approved for a mortgage is the seemingly insurmountable down payment. However, if you’ve served our country in the armed services, you don’t need a down payment! Traditional mortgages can require up to 20% for a down payment. That is a potentially huge weight off a buyer’s shoulders!

It Gets Better for Veterans

VA Loans have other added advantages over conventional financing. The loans are backed by the US government. That benefit is especially helpful for veterans with bad credit. A buyer can have a credit score as low as 580 and still get approved.

Another benefit of the loan being government-backed is that it doesn’t require private mortgage insurance (unlike FHA loans). Any other kind of loan, with less than a 20% down payment, must have Private Mortgage Insurance. PMI protects the lender in case of a default, but in a VA Loan, the government acts as the insurance.

Use our VA Mortgage Calculator to estimate monthly payments.

Sign Up, Soldier!

So how do you get a VA mortgage? The first step is to get a Certificate of Eligibility from Veterans Affairs (We can do this for you with a quick phone call), to show that you are eligible for the program. Once the certification is received by a loan officer and processed (most are instant however manual COE’s can take 5-10 business days), the loan goes for pre-approval. You could qualify for up to a $424,100 loan. Your dream home might be more within reach than you think.

Riverbank Finance offers both 15 and 30-year VA Loans. We can review the benefits of both VA loan terms to find the right fit for your family. Apply for a VA Loan online or in person at our office. Our offices are also handicap accessible making it easy for disabled vets.

VA Refinance Loans

If you already own a home and qualify for a VA Loan, you also can benefit from refinancing through VA Loans. Like other VA Loans, this program was set up with easier qualifications and benefits than a traditional loan. For refinancing, this means that you can cash out up to 100% of the value of your home. So if you haven’t taken advantage of VA Loans in the past and have a remodeling project you’ve been putting off, now is the time. These are benefits you earned for serving our country. Use them!

We, here at Riverbank, are thankful for our armed service members. We feel honored every time a veteran seeks a loan through our services and strive to make the process as easy as possible.

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Buy A House with a Small Down Payment

If you are a first-time homebuyer, getting a mortgage may seem overwhelming — especially with all the different options available. Maybe you don’t have a lot of money for a down payment or your credit isn’t great. The good news is, you can still qualify for a home loan. Here are 4 low or no down payment options that can help you, as a first-time homebuyer, get into the house of your dreams.

FHA Loan

With an FHA loan, all you need is a 3.5% minimum down payment to buy your first home. Because the Federal Housing Administration backs the FHA loan, the qualifications are a bit more lenient. People who have no established credit or small savings for a down payment, and even a credit score as low as 580 can qualify. The FHA loan is also available to immigrants who have a Visa or Green Card, as well as those who have gaps in their employment.

It’s also easier to qualify for an FHA loan if you’ve filed for bankruptcy. With a conventional loan, you have to wait four years after filing Chapter 7 to apply for a mortgage. With the FHA loan, you only have to wait two years. If you filed for Chapter 13, you only have to wait one year. You can also get an FHA loan three years after being foreclosed on your previous property.

VA Loan

The government created the VA loan to provide home ownership to veterans and military personnel. Like the FHA loan, the government backs the VA loan for extra security, so qualifying is easier. To qualify, you must get a certificate of eligibility from the Veterans Administration. Having bad credit may not hinder you from getting approved. VA loans require no down payment or Private Mortgage Insurance (PMI). Veterans can choose either a 30-year fixed VA loan or a 15-year fixed VA loan for up to $424,100. They may also get a cash-out refinance of up to 100% of their home.

USDA Rural Development Loan

For those wishing to buy a home in a rural area, the USDA Rural Development Loan requires zero down payment, making it great for first-time home buyers. The government also backs this loan for added security, so there’s low or no PMI attached to it. You only have to pay a 1% guarantee fee upfront and 0.5% each year after that. That’s less than the 1.75% up front and 0.85% each year with the FHA loan. If you’ve recently filed for bankruptcy or were foreclosed, you won’t have to wait too long to qualify for a USDA loan.

Conventional 1% Down Mortgage

Riverbank Finance offers homebuyers a way to put only 1% down on a home and still get a conventional mortgage. In this case, the home buyer puts 1% down and the lender (Riverbank Finance) contributes 2%, giving home buyer 3% equity when closing on the home. Freddie Mac created this option to make homes more affordable for new buyers. It allows people to buy a new home for, essentially, the cost of one month’s rent and avoid PMI altogether or drop PMI in the future. Your 1% down payment may be a gift from someone, you must have at least a 700 FICO score, and your debt-to-income (DTI) ratio is limited to 43%.  

For more information or to speak with a loan officer about any of these mortgage options, call Riverbank Finance at (800) 555-2098.

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Fannie Mae Relaxes Guidelines for Student Loan Debt

For homebuyers who have been denied for a mortgage due to student loan payments, relief may be in sight. As of April 25th 2017, Fannie Mae is relaxing rules on the amount of student loan debt a mortgage seeker can hold for Conventional mortgages.

Previously, Fannie Mae guidelines required lenders to count at least 1% of their student loan debt as a payment in order to qualify for a home loan. According to Fannie Mae, seven in every 10 graduates of public and non-profit colleges have student loan debt. The result is that 44 million Americans have student loans they are paying off. According to Fannie Mae’s press release, the average amount of student loan debt for one graduate is $34,000. Based on the previous calculations this would prevent many college graduates from becoming homeowners.

Fannie Mae changed the rules so that lenders can look at repayment plans that are INCOME-BASED instead of the 1% rule.

RELATED ARTICLE: Buying a Home with Student Loan Debt

Income Based Repayment Plans for Student Loans

Going back to that average of $34,000, a graduate paying off their student loans the old way would have to pay $340 per month, or 1% of the loan, to be approved for a mortgage. Depending on the kind of job they have and their other expense needs, that may not be reasonable. So now, lenders can see that they are paying what they can AFFORD based on their income, which can be LOWER than the 1% without hurting their odds of approval.

This is good news for college graduates who still have student loans and are looking to get approved for a mortgage. If you’d like to start that process right now complete our online mortgage application.

Good News for College Loan Debt Consolidation:

In addition to this news, home owners who are seeking to reduce their overall debt can refinance their home loan at a lower rate, cash it out, and pay off their student loans with the cash that’s available. According to Fannie Mae, the changes mean:

  • Lenders can offer homeowners, who have at least 20 percent equity in their homes, a cash-out refinance to pay off one or more student loans.
  • Borrowers will have an opportunity to convert higher interest rate student debt to a lower interest rate and potentially reduce monthly debt payments.
  • When at least one student loan is paid off directly to the student loan servicer and delivered to Fannie Mae, they will waive the loan-level price adjustment making mortgage rates lower than standard cash-out refinancing.

Buying a Home with Student Loans and a Low Down payment

These new changes compliment other Home Loan programs for first time home buyers with down payment options such as the Conventional 1% Down Mortgage.  Because this low down payment home loan is a Fannie Mae product, buyers can now used income based repayment plans for their student loans to qualify for financing.

This popular mortgage program is a great fit for recent college graduates that have not had an opportunity to save for a large down payment to become a home owner. Many millennials are choosing to take advantage of these programs to own rather than rent which builds equity and offers tax advantages over renting.

Contact us at (800) 555-2098 to schedule a consultation with one of our loan officers, or apply below to request information for a home loan

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Three Rules for First-Time Homebuyers

first time homebuyers

Ready to stop wasting money on rent and invest in your own home? As a first-time home buyer, the process may seem overwhelming. Here are three rules for first-time home buyers and a basic run-down of everything you need to know to buy your first home.

  1. Get your finances in order

First and foremost, you need to get your finances in order to qualify for a mortgage. You don’t have to have perfect credit in order to get a mortgage, but most loans do have minimum credit score requirements. So it’s not a bad idea to clean up your credit as best as you can.

When lenders consider you for a mortgage, they want to see that your finances are consistent. Keep these things in mind when applying for a mortgage:

  • Don’t quit or change your job
  • Don’t make any major purchases, such as furniture, jewelry, or vehicles
  • Check with your mortgage officer before you move or withdraw any large amounts of money from your accounts
  • Check with your mortgage officer to find out whether you should pay off your debts or collections
  • Don’t use cash for a good-faith deposit, because it’s hard to track
  • Don’t have your credit report pulled too many times, because it can hurt your credit score

Before you get a mortgage, you’ll also have to get all of your documentation in order, including two years of W2 statements, tax returns (if commission or self-employed), 2 months of bank statements, drivers license and social security card. When you apply for the loan, you’ll need to provide all of the documentation to the lender within 24 hours, otherwise your loan closing could be delayed.

  1. Understand your mortgage options

When you talk with a loan officer, he or she can help you navigate all of the available mortgage options. In the past, 20% down payments were required, but programs are available that can help first-time home buyers put down as little as 1% on a 15 or 30-year fixed loan with a low interest rate and no Private Mortgage Insurance (PMI).

Riverbank Finance offers low and no-down payment loans, including government programs, such as the FHA loan, VA loans, and USDA Rural Development home loan. Riverbank also offers a 1% Down Conventional Mortgage, where the borrower only needs a 1% down payment and the lender contributes 2% to give the borrower 3% equity upon closing.

  1. Be ready to close on the house

Knowing the home buying process can help you be prepared so you can close on the house without delays.  After you’ve submitted all of your documentation and your mortgage is approved, you can begin home inspections and the home appraisal. The home appraisal typically costs between $400 and $600, which you’ll have to pay with a credit or debit card before closing.

Once the house is inspected and appraised, you can schedule the closing with your Realtor and the seller. Your loan officer and the title company will work together to finalize the closing costs. Closing costs typically run between 2 and 5 percent of the total price of the home you’re buying. If you are short on funds ask your loan officer about solutions to have your closing costs paid for you. From the application to closing, the process averages between 30 and 60 days (although Riverbank Finance may be able to close in under 2 weeks), and then you’ll get the keys to your new home.

From start to finish, Riverbank Finance can help you purchase your first home. Contact us at (800) 555-2098 to schedule a consultation with one of our loan officers.

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Mortgages for the Self-Empoyed

Getting a Mortgage when Self Employed.

 

The process of getting a home loan when self-employed does not have to be difficult if you are prepared. While the self-employed enjoy the freedom to work when and how they want, full-time employees benefit from getting the same paycheck month-to-month from long-established companies. In the eyes of lenders, that gives them a sense of security the self-employed may not have. This makes working with an experienced mortgage professional essential when getting a mortgage while you are self employed. Here are five key items to getting a loan as a self-employed business owner:

Document Your Income

When banks consider the self-employed for a mortgage, they usually look at the last two years of tax returns. They’ll take the income you earned, combine it, then divide by 24 months to estimate your monthly income.

Generally, you’ll have better odds of being approved on a loan if the monthly debts are less than 45 percent of your monthly income. Of course, you must consider other factors as well. Your loan officer may be able to find items to add back in to your income such as depreciation expenses.

Track your Credit Score and Keep Records

In addition to your income taxes, there are two ways you can prove you aren’t a risk to lenders: a high credit score and adequate record keeping.

A high credit score is crucial for those who work for themselves. Again, it goes back to a reliability factor. Generally a 600-640 FICO score is considered satisfactory for many mortgage lenders if you are self-employed. Government loans such as FHA mortgages may allow self employed borrowers to qualify with as low as a 580 credit score.

Depending on the kind of work you do, you may already have solid record-keeping skills that will make analyzing your income a lot easier. Invoices and accounting software records can help you stay more organized. Lenders need to know you have enough revenue, after expenses, to pay back the loan.

Review Write-Offs with Your Accountant

Tax write-offs are a Godsend for people who work for themselves — until they need a loan. Writing off expenses on your taxes does ease your tax burden, but it also reduces the amount of revenue on your taxes when lenders consider you for a mortgage. Your accountant may offer solutions for write-offs that do not affect your qualifying income such as depreciating assets.

If you are thinking of buying a new vehicle, taking a trip to a seminar, or paying some other huge expense for your business, you may want to wait until after you get approved on the mortgage.

Separate Business and Personal Expenses

Every lender is going to ask for two different but important plans: First, your business plan: What do you sell? How is your business growing? What kind of clients (if it doesn’t breach any confidentiality) do you have? It all comes back to knowing where the money comes from and whether the lender considers the source of your income reliable.

Secondly, every business experiences setbacks, and the self-employed are no exception. Do you have a savings plan, a line of credit for emergencies that will allow you to continue making payments until your financial situation gets better? Additional assets that you can document area always a positive thing when qualify for a mortgage.

Keep up Appearances

Full-time employees give the appearance of being a safer investment. The self-employed can also make themselves more appealing through changes in their appearance. Registering your business and having separate business accounts from your personal accounts can make record keeping easier and give the appearance of legitimacy in your work.

Separating the business from the personal also can help keep more money in your wallet. If you use a business credit card for a work expense, your company can write it off, and your personal income will still not be hurt by the deduction.

So, if you work for yourself, have enough clients, and work to keep your bank account in the black, I do have one good piece of news for you: You’ve already mastered overcoming obstacles and objections as a business owner, so the challenges of getting a mortgage should be nothing new to you.

Apply for a Self Employed Home Loan

To apply for a self employed home loan, call Riverbank Finance today at 1-800-555-2098.

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Buying a Vacation Home

What you need to know about buying a vacation home

You’ve been comfortably settled into your home for quite some time now, and you are financially stable. You may be nearing retirement or are craving a place of relaxation and leisure where you and your loved ones can get together without the hassle of booking hotels. A vacation home in Michigan may be just what you need. Before you jump in, you should understand how buying a vacation home is different from buying a primary home. Here’s what you need to know:

Location.

Your idea of the perfect vacation home may be on the beach, in the mountains, or in a small lakeside town along the white sands of Lake Michigan. Before you decide on the exact location, find out about the growth opportunities in the area you’re considering. Having a vacation home in a popular tourist spot can appreciate the value of your home over time, making it a great long-term investment.

Associated costs.

Interest rates for second homes are typically higher than they are for primary homes. Our mortgage calculator can show you what those rates would look like. When you apply for a mortgage on a second home, mortgage underwriters typically look at the costs associated with the principal amount, interest, property taxes, insurance, and any Homeowners Association dues that come with the property.

Likewise, owning a second home means you’ll have to be prepared for added expenses, such as travel, maintenance, repairs, utility costs, and household necessities. One way you can recoup those costs is by renting out the home when you don’t plan on using it yourself.

Down payment requirements.

When buying a primary home, you can put down as little as three percent, and in some cases, no down payment at all. However, FHA and VA loans don’t apply to second homes. In most cases, your lender may want you to put 10 percent down on your vacation home. If you plan on renting out the property on a part-time basis it could be considered a rental property which requires a 20 percent down payment.

Vacation Home Mortgage qualifications.

When you buy a vacation home, the lender will expect you to have saved at least two months of mortgage payments on your primary home and vacation home if you have reliable income, and six months of mortgage payments if you are self-employed. This is to protect you and the lender in case your income is interrupted for any reason. You may also be required to have a higher FICO score and a lower debt-to-income ratio than you would with a primary home loan.

Owning a vacation home can be a great long-term investment and a wonderful getaway for you and your loved ones. However, the process is often difficult, as the lending requirements are more strict. Contact a mortgage loan officer at Riverbank Finance to discuss your best options for purchasing your dream vacation home.

Apply for a Vacation Home Mortgage

To apply for a Vacation home loan, call Riverbank Finance today at 1-800-555-2098.

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