10 Things to Know About Lake Home Financing
Buying a lake home is a little different from buying a typical house.
Whether you’re looking for a Michigan lake house, cottage, or cabin, understanding the financing before you start shopping can save you time, money, and headaches.
Here are 10 things to know about lake home financing:
1. A Lake Home Can Often Be Financed as a Second Home
If you’re buying a lake home for your family’s personal use, it may qualify for second-home financing.
Fannie Mae’s guidelines generally require a second home to be occupied by the borrower for part of the year and to meet specific property requirements, including being a one-unit dwelling suitable for year-round occupancy.
The fact that a property is called a “cottage” or “lake house” doesn’t automatically determine how it will be financed.
2. Not Every Lake Home Qualifies as a Second Home
This is especially important with Michigan cottages.
Some lake properties are:
- Four-season homes
- Seasonal cottages
- Cabins
- Rental properties
- Unique or unusual structures
The property’s construction, accessibility, utilities, occupancy, and intended use can all affect financing.
Talk to us before making an offer on an unusual lake property.
3. You May Need More Money Down
Lake-home financing can require more financial strength than financing a primary residence.
Your down payment can depend on:
- Loan program
- Credit
- Loan amount
- Income
- Assets
- Reserves
- Property type
And remember that your down payment isn’t the only cash you’ll need.
Plan for closing costs, reserves, inspections, and unexpected lake-home expenses.
4. Your Current Mortgage Still Counts
Buying a lake home doesn’t make your existing mortgage disappear.
You’ll generally need to qualify while carrying the financial obligations associated with both properties.
That means your lender will look at your overall:
- Income
- Debts
- Mortgage payments (including taxes and insurance)
- Assets
- Reserves
Before you start shopping, find out what the numbers really look like.
5. Don’t Underestimate Cash Reserves
A lake home can come with expenses that a traditional home doesn’t.
Think:
- Dock repairs
- Boat lifts
- Well and septic maintenance
- Shoreline work
- Snow removal
- Seasonal maintenance
- Unexpected repairs
Lenders may have reserve requirements, but you should also consider maintaining your own emergency cushion.
You don’t want to spend every available dollar getting the keys to your dream lake house.
6. You Can Buy a Lake Home in Michigan From Out of State
You don’t have to live in Michigan to own a Michigan lake home.
We work with buyers who live outside Michigan and want a vacation property here.
For out-of-state buyers, the mortgage is only part of the equation.
You’ll also want to understand:
- Michigan property taxes
- Insurance
- Seasonal access
- Local lake rules
- Well and septic systems
- Property management
- Snow removal
Having a Michigan-based mortgage broker can be especially valuable when you’re buying from several states away.
7. Rental Income Can Change the Financing
Planning to rent your lake home when you’re not using it?
Let’s discuss it!
A property you personally use as a second home can be treated differently from a property purchased primarily as an investment.
Don’t always assume Airbnb income can be used to make the mortgage work.
8. Waterfront Properties Deserve Extra Attention
A lake home isn’t just another house.
Before financing a waterfront property, you may need to consider:
- Flood zone
- Insurance
- Shoreline
- Erosion
- Dock
- Well
- Septic
- Private roads
- Seasonal access
These issues don’t necessarily prevent financing, but they can affect the property, insurance, or loan process.
The sooner you identify potential issues, the better.
9. Jumbo Loans May Be an Option for Higher-Priced Lake Homes
Michigan has some extremely valuable waterfront properties.
If you’re purchasing a higher-priced lake home, jumbo financing may be an option.
Jumbo loans can have different requirements for:
- Down payment
- Credit
- Income
- Assets
- Reserves
- Property type
If you’re shopping for a higher-end Michigan lake home, it can be worthwhile to compare multiple financing options.
10. Get the Mortgage Figured Out Before You Find the Lake House
This might be the most important one.
Before you fall in love with a lake house, understand:
How much can I comfortably spend?
How much should I put down?
How much cash should I keep in reserves?
Can I use my investments or home equity?
Will my rental plans affect the financing?
Will this particular property qualify?
Once you know those answers, you can shop with confidence.
Ready to Make the Cottage Life Yours?
Give us a call before you start shopping!
Jeremy and Adam have lived in Michigan their entire lives, have visited almost every major lake town, grew up around Michigan cottages, and have financed second homes, lake homes, rental properties, jumbo homes, and dream vacation properties.
We also know experienced Michigan Realtors, lakefront specialists, property managers, and other professionals who can be valuable to an out-of-state buyer.
We don’t just finance Michigan lake homes. We know and love Michigan!
Call us at 616-465-5725; Email us at hello@jpalmortgage.com
Schedule your free meeting or call here
JPAL Mortgage is proudly based in Michigan, where its two owners were born and raised! We love this state and have traveled it far and wide. It’s a passion of ours to help make a smooth landing here in Michigan! Learn more about the team at JPAL
JPAL Mortgage | Your best friend in home finance — even at the lake.
All loans require complete underwriting approval, including satisfactory appraisal and clear title work. Interest rates and closing costs are subject to change. NMLS ID #2189752 | Equal Housing Opportunity
Looking for a Michigan vacation property? JPAL Mortgage has created a complete guide to vacation homes, cabins, lake houses, cottages, etc. We specialize in vacation property financing!