Buying Second Home Could Pay Off Big

With housing prices falling and mortgage rates at historic lows, buying a second home may be a good investment if you plan the purchase carefully.

Obtaining a loan in this climate will be challenging, but if you have a good credit score and some extra money on hand, a second home might pay off big down the road. Here's what you need to consider before you buy:

Be sure you can afford it: The asking price doesn't tell the full story of a second home's cost. Lenders often require a 20% to 30% down payment on a second-home purchase. You're also likely to pay a higher interest rate to cover what lenders see as the increased risk of default. If you get into financial trouble, they reason, you're likely to prioritize the mortgage payments for your primary home. Run the figures thoroughly with your real estate agent before you commit. ...