Vacation Home Mortgage and Second Home Loans

2026 Fannie Mae Guidelines for Michigan Vacation Home Loans

Fannie Mae's second-home rules make a vacation property loan realistic for a lot of buyers who assume they'd need investor-level financing. Your cottage or cabin still has to make sense as a vacation property (a lake house, a place near a ski hill, a cabin in a resort area), but the down payment, credit, and rate requirements track much closer to a primary-residence loan than an investment loan.

Why Buyers Choose a Vacation Home Mortgage:

• You build equity instead of handing money to a hotel or rental host
• Down payments start at 10%, well below investment-property minimums
• Rates run closer to primary-residence pricing than investment-property pricing
• Mortgage interest may be deductible; ask your tax advisor
• You can rent it out occasionally to offset costs when you're not there
• A property the family actually uses, not just an asset on paper

Second Home Loan Requirements for 2026

Second-home financing is a conventional loan product, so it follows Fannie Mae's guidelines rather than the FHA or VA rulebook. Here's what underwriting will actually look at:

What You'll Need to Qualify:

• 10% minimum down payment (put down 20% and PMI goes away)
• 620 minimum credit score, though 740+ gets you the sharpest pricing
• 2–6 months of reserves in PITI payments, depending on your file
• 50% maximum debt-to-income ratio
• Verifiable income and documented assets
• No foreclosures or bankruptcies in recent years
• The home has to work as a personal-use property, not a full-time rental
• A clean appraisal and acceptable property condition

Fannie Mae also dropped the old 100-mile distance rule. Your cottage no longer needs to sit a certain distance from your primary home. It just needs to make sense as a vacation property, like a lake home, a resort-area condo, or a cabin up north.

What Drives Your Rate on a Second Home

Second-home rates typically run about 0.125% to 0.500% above what you'd pay on a primary residence. That's still noticeably lower than investment-property pricing, though it's not identical to a primary-home rate either. A few things move the needle on your specific quote:

Factors That Affect Your Pricing:

• Credit score: 740+ gets the best available pricing
• Down payment: 20% or more drops PMI and can improve your rate
• Debt-to-income ratio: Lower DTI generally means better pricing
• Loan amount: Jumbo balances are priced differently than conforming loans
• Property type: Condos are often priced differently than single-family homes
• Cash reserves: More reserves on hand can work in your favor

Ask about an extended rate lock if you're still house hunting. It protects your rate while you look for the right property instead of forcing you to lock before you've found it.

Other Ways to Finance a Vacation Property

A standard second-home mortgage isn't the only path. Depending on your equity position and the property itself, one of these might fit better:

Alternatives Worth Considering:

• Cash-out refinance: pull equity from your primary home to fund the purchase
• HELOC: a flexible line of credit against your primary residence
• Home equity loan: a fixed-rate second mortgage on your current home
• Jumbo financing: for vacation properties above conforming loan limits
• Portfolio loans: non-conforming options for unusual properties or income situations
• Seller financing: negotiated directly with the property owner

Tax Considerations for Second-Home Owners

A second home can come with real tax advantages, but the rules vary quite a bit from one situation to the next. Talk to a tax professional before assuming any of this applies to you specifically.

Things to Ask Your Tax Advisor About:

• Mortgage interest deduction on qualified residence debt
• Property tax deduction, subject to the current SALT deduction cap
• Depreciation if the property is rented part-time
• Rental expense offsets against any rental income you report
• Capital gains treatment when you eventually sell

Tax law changes often. This isn't tax advice, just a starting point for the conversation with your CPA.

Riverbank Finance LLC works with Michigan buyers on cottages, lake homes, and cabins up north every season, and our loan officers can walk you through second-home financing from the first phone call to closing day.

Call 1-800-555-2098 to talk through your options, whether you're eyeing a lakefront cottage, a mountain cabin, or a place on the water.

Speak with a Vacation Home Expert

Why Buyers Work With Riverbank Finance

We're a Michigan-based lender, which matters when you're financing a cottage in a market that out-of-state call centers don't know well. Our loan officers understand local property tax patterns, seasonal appraisal quirks, and the practical differences between closing on a lake home in Traverse City versus a condo downstate.

If you've already got a rate quote from another lender, bring it to us. We'll tell you honestly whether we can beat it or match it, and if we can't, we'll say so.

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