When is the best time to buy a lake home? What’s the first thing you should do when you’re ready to buy? What are some hidden costs buyers should look for? Buying a new home can be a stressful experience, with plenty of questions and curveballs. With the help of an experienced mortgage expert, you can be as prepared as possible as you start your home-buying journey!
We sat down with Colleen Karst, Choice Bank Senior Vice President and Mortgage Lending Manager, and Blair Sandy, SVP Director of Residential Mortgage Lending.
#1 Figure out what you can afford first.
Colleen: Don’t go out and fall in love with a home before you know how much you qualify for. If you’re looking at a $500,000 home and you can only afford $300,000, you’re going to be disappointed. Or, maybe you can afford more. I always recommend coming into the bank first and getting pre-qualified, so you have a good idea of what the payment will be, what you’re comfortable with, and what you can afford.
Blair: Knowing what the loan amount or the purchase price would be for your comfort level is important. That way you have both of those bookends as you begin your search.
#2 The best time to buy is…
Colleen: Up north, the number of lake home listings goes down in fall and winter because it’s hard to move in and out of a place when it’s below zero. So, the more active time to buy is in the spring.
Blair: That said, you may be able to get a better deal when you look in the offseason because fewer people are buying.
Colleen: Right! You’ll have a smaller inventory with fewer homes to choose from, but if the seller is in a bind, you can find those listings and potentially strike a great deal.
- Spring: Highest inventory to choose from; many people buying at this time.
- Summer: Fast-paced listing and selling; those that are buying want to close right away to get in the home as soon as possible.
- Fall: Number of people listing and buying homes begins to decline.
- Winter: Low inventory of homes and fewest amount of people buying due to cold temperatures; greater potential to get a good deal.
#3 Connect with a realtor who knows the market.
Colleen: It’s important to connect with a realtor who is familiar with different lakes and the niche lake home market. They can give you the guidance that you need. We’re the financing experts, but we don’t always know everything about the area or the market. So it’s important to get in touch with someone who knows that.
#4 Be prepared for hidden costs and maintenance needs.
Colleen: Expect a lot of hidden costs. I learned this from my own experience in buying our lake cabin. It had quite a few problems when we bought it because it hadn’t been well maintained. We quickly learned that it’s best to keep up on basic maintenance on a regular basis so that you don’t have a bigger issue down the road.
Blair: I agree. In fact, the expenses of a second home or a lake property can sometimes be more than the expenses of your primary residence. Here’s something that I’d never thought about:
My father-in-law pays around three times the amount of insurance on his seasonal cabin outside of Bismarck because of the fire code rating. The nearest fire station is over 15 miles away, and the chances of that cabin still standing if it’s on fire are low. Those hidden costs are definitely things to be mindful of.
#5 Don’t forget about equity.
Blair: Something people don’t realize is that they can tap into equity on their primary residence if they are short on funds and want to purchase. People think they have to wait and save up the money for the down payment to put 10 percent down — but we as loan officers can be more creative because we see the whole picture, and can help people figure out the best route for purchasing.
Colleen: For instance, if you’re buying a second home want to put 20 percent down but you only have enough to put 15 percent down, and you have equity in your primary residence, we can do a home equity line of credit for you in a second position or a second mortgage. This way, you can access those funds to get the down payment that you need.
Blair: It can become a safety net for homeowners. The other thing to note is that a second home does require a larger down payment. With a first home, you can get in as little as three to five percent. With a second home, you’re going to need a minimum of 10 percent down in most cases.
Colleen: Another thing to keep in mind is that you are qualified based on all of the obligations of your primary residence, tax, and insurance. You do have to take into account all of the customer’s obligations and make sure they really do qualify for the second home.
Consulting with a financing expert is the best place to begin when looking to buy a lake home—whether it’s your first or last. Contact one of our Choice Home Loan experts today.