Banks will normally scrutinize credit reports and income documentation more stringently when you borrow to buy a second home, because they want to make sure that both of your mortgage obligations can be paid every month without a problem. And they may require larger deposits and charge slightly higher loan fees or rates of interest than they did when you bought your first home. Nevertheless, many homeowners find it easy to qualify for new loans, and this is especially true for those who maintain excellent credit ratings. With the potential to profit from your purchase through equity appreciation, the repayment of a second mortgage is often easier than it was for a first mortgage.

For those who plan to use the second home as an income-producing property, there are also available tax deductions. As a landlord, you can usually deduct such things as repairs, utilities, and even routine trips you take to visit your property and check on its upkeep. Many investors combine their use of the second home, so that it’s rented or leased sometimes, and at other times it’s used as a personal vacation home. When you aren’t making money by leasing it to others, you save money by not having to pay for hotel lodging at vacation time. A qualified tax planner can help you find all of the various tax advantages to spending your vacations in your own second home.

When applying to secure a loan for an income producing second home, it’s a good idea to present your lender with a thorough business plan and any documentation that illustrates the practical income potential of the property. If the previous owner made a profit each year by renting it out as a holiday retreat in the summertime, your lender will be more inclined to have confidence in your own ability to manage the property for extra income. One good way to show income potential is to hire a professional appraiser, who can do a market analysis of your property by comparing it to similar income-producing properties in the same area.

Another popular way to finance a second home purchase is by using an equity line of credit based on the value of one’s first home. Banks typically charge more interest for these loans, but you’re able to avoid many of the closing costs that are associated with originating a separate mortgage. And regardless of whether you apply for a mortgage or an equity loan, you may be eligible for tax deductions of interest payments and other related expenses.

Make sure your lender offers options

There are a lot of options other than the traditional 30-year fixed rate mortgage. Depending on your needs and personal situation, an Adjustable Rate Mortgage (ARM) or Interest-Only mortgage might be a better fit for you. Or, possibly, you may prefer a loan with a longer or shorter term. A good lender should be able to offer you a variety of options so you can find the one that best suits your needs. Be wary of any lender that tries to push one particular type of loan.

Get your “pre-approval” in writing

Some Home Purchase lenders will “pre-qualify” you–but that doesn’t mean you’re guaranteed to get the loan! In fact, in most cases, “pre-qualification” means almost nothing at all. Choose a lender who will “pre-approve” your application instead, which is a more involved process. When you’ve been “pre-approved,” the loan officer has contacted your employer, bank, credit card companies, etc. Once you’re “pre-approved,” you’re a lot more likely to get the final approval on your loan.

“Lock in” the rate you’re quoted

Interest rates change almost daily–they can be down on Monday, and sky-high by Friday! And some lenders will quote you a super low rate to get your business, even though they know the rate may change by the time your loan is finalized. If a lender quotes you an interest rate, ask him/her to “lock it in” for 30, 60 or 90 days. Reputable online Home Purchase lenders will guarantee you your promised rate even if it takes another month or two until you close the loan.

Once you know your online Home Purchase lender is willing to offer you options, pre-approve your loan, and lock-in your rate, it’s time to compare rates, fees and other charges to make sure you’re getting the best deal.