Turn your 30A getaway daydreams into reality — in this guide I will walk you through it, step by step.

Dream of owning a 30A vacation home on the Emerald Coast, but feeling overwhelmed? It’s actually easier than you may think.

Let’s analyze your options.

1. Match housing choices to your lifestyle

Many people assume they must own a primary residence before owning a vacation home, but that’s not necessarily true. What’s really important is matching your housing choices to your lifestyle.

You may live in a city, but long to escape the rat race and enjoy your weekends at the beach. You could rent a modest condo in the city and buy a vacation home at the beach. 

The financing and tax implications are almost the same.

2. Decide how you’ll use it

From a financing and tax standpoint, you need to consider how you intend to own and use your property. You have three options:

  • Primary residence. You can buy for as little as 3 percent down (if your loan doesn’t exceed $417,000), and you get significant homeowner tax benefits.
  • Second home. You can use your second home anytime you want, but lenders won’t let you rent the home. Buy for as little as 20 percent down, and qualify for the loan using your full primary residence cost plus your full second home cost. Mortgage rates and tax benefits are the same as primary residences.
  • Investment property. You can rent the home and use it when it’s not rented. Rates are .25 percent to .375 percent higher than second home rates, and your down payment usually starts at 30 percent. You qualify for the loan using your full primary residence cost plus your full investment home cost, but you can use rental income to help qualify. Tax treatment is less beneficial, but the extra income can help with affordability.

3. Understand the total cost of owning it

First, determine what you can afford. Then you’ll find a lender to formally analyze the cash available for down payment, closing costs and reserves. You’ll also calculate the total monthly cost of your existing home (whether you rent or own), plus the total monthly cost on the vacation home.

 

You also need to plan for personal budget items that lenders don’t use in their qualifying calculations:

  • Gas, electric, cable TV and internet
  • Furniture and housewares
  • Travel costs to your vacation home
  • Total cost of property maintenance items, like cleaning, landscaping and pool/spa upkeep

4. Review monthly and transactional cost line items

Suppose you live in Atlanta and want to purchase a 30A vacation home in Seagrove Beach for $600,000. Here’s how much it would cost as a primary residence, second home and investment property.

Estimated monthly costs
  Primary or second home Investment property
Mortgage payment $2,223 (30-year fixed mortgage at 3.75%) $2,035 (30-year fixed mortgage at 4.125%)
Insurance $100 $100
Property tax $600 $600
TOTAL ESTIMATED MONTHLY COSTS $2,923 $2,735
     
Estimated cash to close
  Primary or second home Investment property
Down payment $120,000 (20%) $180,000 (30%)
Lender fees $2,500 $2,500
Title/escrow/inspection fees $3,500 $3,500
TOTAL ESTIMATED CASH TO CLOSE $126,000 $186,000

5. Make an offer using a local real estate agent and lender

Many vacation properties are in specialized local markets, so it’s best to work with a local agent (like yours truly) who can help you find the right property and connect you with lenders.

I can clarify local transaction fees, taxes and commissions, as well as advise on local zoning and property rental rules. For example, some communities on 30A don’t allow short-term rentals for vacation homes, but others do.

Local lenders will be more comfortable with appraisals and lending in vacation markets. For example, some out of state lenders won’t lend on condominium units. 

If you follow these steps, your closing will be a snap, and you’ll be relaxing in your vacation home before you know it. 

If you have more questions, please don’t hesitate to get in touch. 

Original article found on Zillow