What to Know about Financing a Lakefront Property in Ohio
For all of the potential lakefront buyers out there who are not fortunate enough to be able to purchase their dream home in cash, they will need to finance their purchase. This is a very common occurrence but for many buyers who are unfamiliar with the lakefront market, they also don’t know some of the irregularities when it comes to financing these types of properties. Below we will go over some different topics that each buyer will need to understand before financing a lakefront property in Ohio.
A Second Home
The first thing to determine is if your dream lake house is going to be a secondary home, or a primary home. The reason this matters is because if you are financing a secondary home, such as a lakefront weekend retreat, then you have to disclose this to the bank. The down payment requirements for a secondary home are different than a primary; with a primary there are different loan options available with varying down payment requirements such as FHA and VA loans. If this home is a secondary home and you are getting a mortgage, you have to use a conventional or jumbo loan with a minimum of 20% down.
Jumbo Loans
Lakefront homes at certain lakes are much more expensive than others, and so the financing options you have available to you will change. Most people don’t know that a conventional mortgage has a limit on how much it can loan out. If your lake home is priced above that you may need to seek out a jumbo loan, which loans more than a regular conventional loan. However, jumbo loans are harder to get and generally have a higher interest rate.
Appraisal Issues
Make sure when financing a lake home that the bank’s appraisal company is familiar with appraising lake homes, if they are not, you may have a hard time getting an appraisal to pass for several reasons. Market values change from lake to lake, and value is also dictated on lake frontage, location and view. The appraiser will need to make sure to compare apples to apples. Also, if the property has an additional lot with the sale this can throw off the appraiser. Additional lots that are adjacent but able to be split off or built on come with their own unique value. Lakefront lots can reach up to $100,000 or $200,000 at lakes like Apple Valley, and so throwing an additional lot in with the purchase of a lakefront home can throw off the appraisal, if the appraiser doesn’t understand the lot value.
Financing a Lakefront Lot
If purchasing a lot on its own to later build your dream lake house, financing can also be a bit tricky. If wrapping the land in with the build loan you have to borrow more, are subject to appraisal on the land (see appraisal issues above) and will more than likely have a set time by which you have to start building. A lot of times it is easier to buy the land first, in cash if possible, and then finance the build separately when you are able and ready to move forward with it.
Just remember that there are a lot of financing options out there for your lake home so make sure to speak with your lakefront specialist before making any decisions. And remember – Life is Short Buy The Lake House!
Written By Justin Shelton Lakefront Consultant – The Lake Team