Buying a second home typically requires at least 10% down with a conventional loan, though some lenders and loan programs set the floor at 15%. That’s significantly more than the 3% to 5% you might have put down on your primary residence, but several strategies can help you reduce or cover that upfront cost without draining your savings.
Why Second Homes Require More Down
Lenders view second homes as riskier than primary residences. If money gets tight, borrowers are more likely to walk away from a vacation property than the roof over their head. To offset that risk, conventional lenders generally require a minimum of 10% down on a second home. Fannie Mae’s guideline is 15% down for a single-unit property and 25% for a two-to-four-unit property. Your actual requirement depends on your credit score, debt load, and the property itself. A score below 700 or a high debt-to-income ratio will likely push the requirement higher.
Second homes also carry higher loan-level price adjustments, which are fees that Fannie Mae and Freddie Mac layer onto loans they consider riskier. These fees get baked into your interest rate or charged as upfront points at closing, so even at 10% down you’ll pay more per month than you would on a comparable primary residence mortgage. Putting more down reduces these surcharges, which is worth factoring into your “lowest possible down payment” calculation.
What Qualifies as a Second Home
Before chasing a low down payment, make sure your purchase actually qualifies as a second home rather than an investment property. Investment properties face even steeper down payment requirements, often 20% to 25%. To count as a second home, you generally need to use the property for personal purposes at least 14 days per year, or at least 10% of the total days it’s rented out, whichever is greater. The property must also be suitable for year-round use and typically can’t be subject to a management company agreement that gives a third party control over occupancy.
If your lender discovers the property is primarily a rental, they can reclassify the loan, which could trigger higher rates, additional fees, or even a demand for immediate repayment. Be honest about how you plan to use the home.
Use Equity From Your Primary Home
If your current home has appreciated, tapping that equity is one of the most common ways to cover a second home’s down payment without liquidating investments or depleting cash reserves. Two main tools work here: a home equity line of credit (HELOC) and a home equity loan.
A HELOC gives you a revolving credit line secured by your primary home. Most lenders let you borrow up to 80% or 85% of your home’s value, minus what you still owe on your mortgage. So if your home is worth $400,000 and you owe $250,000, you might access $70,000 to $90,000 through a HELOC. You draw what you need for the down payment and pay interest only on what you use during the draw period, which typically lasts 10 years.
To qualify, you generally need at least 15% to 20% equity in your primary home, a credit score of 680 or higher, and a debt-to-income ratio of 45% or lower. Keep in mind that the HELOC payment will count toward your total monthly debt when you apply for the second home mortgage. If the added obligation pushes your debt-to-income ratio too high, you may not qualify for both loans simultaneously. Run those numbers before you apply.
A home equity loan works similarly but gives you a lump sum at a fixed rate instead of a revolving line. The trade-off is less flexibility but more predictable payments.
VA Loan With Remaining Entitlement
If you’re an eligible veteran or active-duty service member, a VA loan is the only mainstream path to buying a second home with zero down. The VA doesn’t technically offer “second home” loans, but you can use your remaining entitlement to purchase another property you intend to live in at least part of the time, such as a home near a new duty station while keeping your existing home.
Here’s how it works. The VA guarantees up to 25% of the loan amount. If you’ve already used some entitlement on your current home, you have what the VA calls “bonus” or “second tier” entitlement left over. To figure out how much you can borrow without a down payment, check your Certificate of Eligibility for the entitlement you’ve already used, then subtract that from 25% of the conforming loan limit in the county where you’re buying. Multiply your remaining entitlement by four, and that’s your maximum no-down-payment loan amount.
For example, if the county loan limit is $766,550 and you’ve used $50,000 in entitlement, your remaining bonus entitlement is roughly $141,637. Multiply by four and you could borrow up to about $566,550 with no money down. If you want a pricier property, your lender will require a down payment to cover the gap between your entitlement and 25% of the loan amount.
VA loans also skip private mortgage insurance entirely, which saves you a meaningful amount each month. You will pay a VA funding fee at closing, typically between 1.25% and 3.3% of the loan amount depending on your down payment and whether this is your first VA loan. That fee can be rolled into the loan balance.
Put Down 10% With a Conventional Loan
For most buyers, 10% down on a conventional loan is the realistic floor. At that level, you’ll need to pay private mortgage insurance (PMI), which typically costs 0.5% to 1% of the loan amount per year. On a $300,000 mortgage, that’s roughly $125 to $250 per month added to your payment. PMI drops off once you reach 20% equity, either through payments or appreciation.
To get approved at 10% down, aim for a credit score of at least 700 and a debt-to-income ratio under 43%. A score of 620 is the technical minimum for most conventional lenders, but at that level you’ll face higher rates and may be pushed toward a larger down payment. Six months of mortgage reserves, meaning enough cash to cover six months of payments on both your primary and second home, is a common lender requirement for second home purchases.
Gift Funds and Down Payment Assistance
Conventional loans allow gift funds from family members to cover part or all of your down payment, though lenders will require a gift letter confirming the money isn’t a loan. If you’re putting down less than 20%, some lenders require that at least 5% comes from your own funds rather than a gift, but policies vary.
Down payment assistance programs are far less common for second homes than for first-time buyers. Most state and local programs restrict eligibility to primary residences. However, if you’re relocating and the second home will eventually become your primary residence, some programs may apply. Check your state housing finance agency for specifics.
Other Ways to Reduce Your Upfront Cost
Negotiating seller concessions can lower your out-of-pocket costs at closing, even if they don’t reduce the down payment itself. Sellers can typically contribute up to 6% of the purchase price toward your closing costs on a second home with 10% to 25% down. That frees up more of your cash to go toward the down payment.
Buying in a lower-cost market is another straightforward lever. A 10% down payment on a $200,000 lake house is $20,000, while 10% on a $500,000 beach condo is $50,000. The percentage stays the same, but the dollar amount you need to save changes dramatically.
Some buyers also consider purchasing the second home as a primary residence by relocating, then converting their current home to a rental or selling it. This opens up low-down-payment options like FHA loans (3.5% down) or conventional loans at 3% to 5% down. It’s a legitimate strategy as long as you genuinely intend to live in the new home as your primary residence. Claiming primary occupancy to get a lower down payment when you actually plan to use the property as a vacation home is mortgage fraud.
What to Budget Beyond the Down Payment
The down payment isn’t your only upfront expense. Closing costs on a second home typically run 2% to 5% of the purchase price, covering appraisal fees, title insurance, origination charges, and prepaid taxes and insurance. On a $300,000 home, that’s $6,000 to $15,000 on top of your down payment.
Lenders will also scrutinize your cash reserves more carefully than they would for a primary home. Expect to show two to six months of combined mortgage payments for both properties sitting in verified accounts. If you’re stretching to make the minimum down payment and have little left over, approval becomes much harder. A strong reserve position can also help you negotiate a better rate, since it signals lower risk to the lender.