If you’re considering purchasing a second home in beautiful St. George, Utah, you’re not alone. Many people are drawn to this stunning area for its warm climate, breathtaking landscapes, and vibrant community. Whether you’re looking for a vacation getaway in Desert Color or Arcadia, a rental property, or a place to retire to in Sun River, securing a second home loan can help you achieve your dreams. Let’s explore the steps you need to take on your path to obtaining a second home loan in St. George.

First, it’s essential to understand what a second home loan is. Unlike a primary residence loan, which is secured by the home you live in, a second home loan is for a property you may not occupy year-round. Lenders typically categorize these as vacation homes or investment properties. The classification impacts the loan terms, down payment requirements, and interest rates, so being clear about your intentions with the property is crucial. With a second home, potential rental income is not used to qualify; whereas an investment loan can utilize expected rental income to increase your income.

Before diving into the mortgage process, you should assess your financial health. Lenders will look at your credit score, income, available assets, and debt-to-income ratio. A strong credit score can put you in a better position for favorable loan terms. If you need to improve your credit score, focus on paying down debts, making payments on time, and avoiding new credit inquiries before applying for a loan.

Next, determine how much you can afford. It’s vital to have a budget in mind that includes not only the mortgage payments but also property taxes, insurance, maintenance, and HOA fees, if applicable. Speak to a loan officer to help estimate these costs.

When it’s time to consider how you’ll finance your second home. There are several loan options available. For example, a well-qualified borrower may get discounted second home rates for a 5 year Adjustable Rate Mortgage (ARM). Typically, lenders want a down payment of at least 20% for a second home or investment property. By speaking with a mortgage broker, you can discover various loan options from 

A popular option for rentals is a Debt Service Coverage Ratio (or DSCR) loan. These can be ideal for short-term/vacation rentals. With these, the income generated from the property is used to qualify you instead of your other employment income.

It’s also essential to consider the differences in interest rates for second home loans compared to primary residence loans. Second home loans could have slightly higher rates, but this shouldn’t deter you. Many factors influence interest rates, including your financial profile and the property’s location.

A pre-approval letter from your lender shows that you’re a serious buyer and gives you a better idea of your budget. Reach out when you're ready to get a pre-approved. The pre-approval process involves a lender reviewing your financial documents and may include a soft or hard credit check.