What Lenders Mean by “Second Home”

A second home is different from a primary residence or an investment property. Lenders evaluate how you’ll use the home and apply specific guidelines for down payment, reserves, and rental activity. Getting the classification right early helps you avoid delays and surprises later.

Primary vs. Second vs. Investment

• Primary residence: Your main home where you live most of the year.

• Second home: A one-unit property suitable for year-round use that you personally occupy part of the year. Limited personal rentals may be allowed, but rental income usually cannot be used to qualify.

• Investment property: Primarily for rental income. These carry higher down payments, reserve requirements, and stricter underwriting.

Be clear about your intent. Misrepresenting occupancy on a mortgage application is considered fraud.

Common Financing Paths for Waterfront and Second Homes

Waterfront property values vary widely depending on frontage, access, and condition. Work with a local lender familiar with lakeshore and resort-area financing so you can compare options accurately.

Conventional Loans for Second Homes

Conventional loans are the most common for second homes. Many lenders begin around 10% down for a one-unit property, though your credit score, debt-to-income ratio, and the property’s characteristics can influence that.

Expect to show cash reserves, typically equal to two months of total mortgage payments. If you own multiple properties, that number may increase.

Jumbo Loans for High-Value Waterfront Homes

If your loan amount exceeds federal conforming limits, you’ll need a jumbo loan. These programs usually require larger down payments, higher credit scores, and stronger reserves. Check the current FHFA conforming limits and review options with your lender.

Government-Backed Options

• FHA loans are only for primary residences, not second homes or vacation properties.

• VA loans are also designed for primary residences, though limited exceptions may exist for eligible borrowers.

Short-Term Rentals and Your Loan

If you plan to rent your property periodically, discuss this upfront. Second-home loans are for personal use first and foremost.
Frequent or professionally managed short-term rentals (such as through Airbnb or Vrbo) may cause lenders to reclassify your property as an investment, which changes your loan terms.

Before buying, check local short-term rental ordinances for your waterfront community — many West Michigan cities and townships now require registration, minimum-stay rules, or annual permits.

Waterfront-Specific Costs and Approvals

Buying along the water adds important considerations for both ownership and financing.

Flood Zones and Insurance

If your home or structures are within a Special Flood Hazard Area, lenders will require flood insurance. Order a flood determination early in the process and compare coverage through the National Flood Insurance Program (NFIP) and private insurers.

Shoreline Permits and Docks

Many Michigan shoreline projects require state permits from the EGLE Water Resources Division. This applies to seawalls, riprap, dredging, permanent docks, or work on bottomlands. A pre-application consultation with EGLE can help streamline your plan.

Erosion and Maintenance

The Great Lakes’ natural water level fluctuations and seasonal storms can affect erosion and shoreline stability. Factor in long-term maintenance and potential reinforcement costs for docks, seawalls, and retaining structures.

Local Due Diligence for West Michigan Waterfront Homes

Each West Michigan waterfront community — from Grand Haven and Spring Lake to Holland, Saugatuck, and beyond — offers unique conditions that affect insurance, maintenance, and property value.

Utilities and Taxes

• Confirm whether city water, sewer, or septic systems serve the property.

• Ask about pending special assessments or local improvement districts.

• Review county millage rates and tax implications for second homes.

Appraisal and Valuation
Waterfront appraisals rely on comparable properties with true water frontage. Appraisers evaluate frontage type, legal access, shoreline improvements, and flood or erosion risk. Your lender will want a detailed report that includes shoreline condition and any structural features like docks or seawalls.

Step-by-Step Plan to Finance with Confidence

1. Clarify your use — Decide whether the home will be a primary, second, or investment property.

2. Compare loan types — Conventional vs. jumbo, depending on your purchase price.

3. Plan your down payment and reserves — Start with common second-home benchmarks and verify requirements with your lender.

4. Order flood and insurance reports early — Understand any flood zone implications before you make an offer.

5. Check local rental regulations — Verify ordinances if you plan to rent periodically.

6. Review shoreline permits and past work — Consult EGLE guidance before altering seawalls, docks, or vegetation.

7. Inspect shoreline structures — Hire a contractor experienced with docks and erosion control.

8. Confirm utilities and tax details — Review with the township and county before closing.

Ready to Explore West Michigan Waterfront Living?

Buying a waterfront or second home is about more than financing — it’s about lifestyle, peace of mind, and protecting your investment. Work with a local West Michigan real estate team that understands shoreline properties, flood considerations, and seasonal market trends.

Whether you’re drawn to the calm of an inland lake or the open views of Lake Michigan, the right plan will help you move forward confidently.

Connect with Sandi Gentry and The Sandi Gentry Team for expert guidance, personalized strategy, and insider insight on West Michigan’s waterfront and second-home markets.

FAQs

What are typical down payments for West Michigan second homes?
Most lenders start around 10% down, though your credit, debt-to-income, and property type can raise or lower that requirement.

Can I use FHA or VA financing for a waterfront second home?
No — FHA and VA loans are for primary residences. Ask your lender about conventional or jumbo options instead.

Will short-term rentals affect my mortgage?
Yes. Heavy or frequent short-term rentals can make your home qualify as an investment property, which requires different loan terms.

Do I need flood insurance for a West Michigan lakefront home?
If your property lies in a Special Flood Hazard Area, flood insurance is required by federally regulated lenders. Always check FEMA’s flood maps early.

What reserves do lenders require for second-home loans?
Most conventional programs expect at least two months of total mortgage payments in reserve, with more required if you own multiple financed homes.