Can You Afford a Second Home?

  |  September 19, 2012

Flickr/cletch

It’s a question many of our readers are asking themselves, and one that the Daily Freeman/The Street attempted to answer this week.

The answer, of course, is it depends — do you have the money, or can you borrow against your primary residence? Have you figured out your debt-to-income ratio, which is “figured by dividing your total monthly debt payments for everything — existing mortgage, the new mortgage, car and credit cardpayments, and so on — by your gross monthly income. If the figure is less than 36%, you have a fair shot at a loan, if your payment history and credit rating are good. Some lenders will approve applicants with higher ratios; you’ll have to shop around.”

Expect to put 20% down and pay a slightly higher interest rate, they advise. But don’t be discouraged, they advise. “After all, even if lenders are more conservative these days, they make money only if they approve loans.”

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