With updated 2025 Fannie Mae guidelines, securing a vacation property loan is more accessible than ever. Many families choose vacation homes over expensive hotel stays and resort fees, making it a smart long-term investment. Real estate typically appreciates over time, meaning your holiday home mortgage helps build wealth while creating lasting memories.

Key Benefits of Vacation Home Mortgages include:

Understanding current Fannie Mae vacation home loan guidelines is crucial for approval. These conventional mortgage products have specific requirements that differ from primary residence loans. Here are the updated 2025 requirements for second home financing:

Updated Vacation Home Mortgage Requirements:

It's important to understand how vacation home loans differ from investment property financing. This classification affects your interest rates, down payment requirements, and loan terms.

Vacation Home (Second Home) Characteristics:

• Used primarily for personal enjoyment and family vacations
• Located in vacation destinations (beaches, mountains, lakes)
• Can be rented occasionally but not full-time
• Lower interest rates than investment properties
• 10% minimum down payment

Investment Property Characteristics:

• Purchased primarily to generate rental income
• Rented out most or all of the time
• Higher interest rates and fees
• Typically requires 20-25% down payment
• Rental income can help with qualification

Second home mortgage rates are typically 0.125% to 0.500% higher than primary residence rates, but significantly lower than investment property rates. Several factors influence your final rate:

Rate Factors for Holiday Home Mortgages:

• Credit Score: 740+ scores receive the best pricing
• Down Payment: 20%+ down eliminates PMI and may reduce rates
• Debt-to-Income Ratio: Lower DTI can improve pricing
• Loan Amount: Jumbo loans may have different pricing
• Property Type: Condos vs. single-family homes
• Cash Reserves: Higher reserves may improve terms

While traditional vacation home financing works for most buyers, alternative options may better suit your financial situation:

Alternative Financing Options:

Owning a second home mortgage can provide several tax advantages, though rules can be complex. Consult with a tax professional for specific advice:

Potential Tax Benefits:

• Mortgage Interest Deduction: On qualified residence debt
• Property Tax Deduction: Up to $10,000 total (SALT cap)
• Depreciation: If used as rental property part-time
• Rental Income: Offset by eligible expenses when renting
• Capital Gains: Potential appreciation when selling

Note: Tax laws change frequently. Always consult with a qualified tax advisor regarding your specific situation.

Can I use a VA or FHA loan for a vacation home?

No, government-backed loans (VA, FHA, USDA) are restricted to primary residences only. Vacation home loans require conventional financing.

How much can I borrow for a second home?

Loan limits follow Fannie Mae conforming limits, currently $766,550 for most areas in 2025. Higher-cost areas may have increased limits.

Can I rent out my vacation home?

Yes, but it must remain primarily for personal use. Full-time rentals would classify it as an investment property with different requirements and rates.

Do I need mortgage insurance on a vacation home?

PMI is required with less than 20% down payment. Unlike FHA loans, conventional MI can be removed once you reach 20% equity.

How long does vacation home financing take?

Typically 30-45 days from application to closing, similar to primary residence loans. Having all documentation ready can expedite the process.

What about vacation homes in other states?

Riverbank Finance can arrange vacation home mortgages in multiple states. Popular destinations include Florida beaches, Colorado mountains, and Arizona desert resorts.