Florida is the country's most popular vacation home market, and it's easy to see why. But the financing is more complicated than buying a primary residence, and the rules that govern what counts as a vacation home versus an investment property can determine your rate, your down payment, and whether your loan closes at all.
Vacation Home vs. Investment Property: The Distinction That Drives Everything
A vacation home and an investment property look similar on the surface. The difference that matters to a lender is occupancy intent. A vacation home must be a property you personally use for at least part of the year, at a reasonable distance from your primary residence. An investment property is one you buy primarily to rent out.
If you plan to rent your vacation home on platforms like Airbnb or VRBO, lenders will look at how much rental activity you're projecting. Heavy short-term rental use often pushes a property into investment property classification, which means higher rates and tighter underwriting.
This isn't just lender policy. It's written into the loan documents you sign. Misrepresenting occupancy intent is mortgage fraud. The way to handle this correctly is to talk with your lender honestly about your plans before you're under contract.
Down Payment and Rate Differences
Vacation homes financed as second homes require a minimum 10 percent down payment for conventional loans, compared to 3 to 5 percent for a primary residence. If you're buying a condo, the project also has to be Fannie Mae or Freddie Mac approved, which adds another hurdle.
Rates on vacation home loans typically run 0.25 to 0.75 percentage points above primary residence rates. It's not dramatic, but on a $500,000 purchase it adds up over a 30-year term.
Investment property loans require 15 to 25 percent down and carry rates that are often 0.5 to 1.5 points higher than primary residence rates. If your Florida property is going to be primarily a rental, plan for those terms from the start. Our guide to choosing the right home financing product breaks down how different loan types compare across these situations.
Not sure if your Florida property qualifies as a second home?
Occupancy classification affects your rate, your down payment, and your loan program. We'll tell you exactly what you qualify for before you write an offer.
Get Pre-Approved NowCondo Considerations in Florida
Florida's condo market adds a layer of complexity. Post-Surfside, lenders are stricter about condo project approval. The condo association must meet reserve funding requirements, and buildings with open special assessments or deferred maintenance can lose their approval status, meaning conventional financing isn't available in that building.
Condotels, resort-style condos operated like hotels with mandatory rental programs, are a separate category entirely. Most conventional lenders won't touch them. Financing for condotels typically requires a non-QM portfolio product with larger down payments and higher rates.
FHA and VA Loans Don't Work for Vacation Homes
FHA and VA loans are for primary residences only. You can't use an FHA loan to buy a beach condo you'll visit four weeks a year. If you want those loan types, the property has to be your primary home, and you'd have to certify that at closing.
Conventional loans through Fannie Mae and Freddie Mac are the standard product for vacation and second homes. Some buyers also use HELOCs or cash-out refinances on their primary residence to fund a vacation home purchase, which avoids the second-home rate premium entirely.
What the Underwriting Process Looks Like
Vacation home underwriting looks at debt-to-income ratios, credit scores, and reserves more conservatively than primary residence lending. Most lenders want to see at least two to six months of mortgage payments in liquid reserves on top of your down payment and closing costs.
If you already have a mortgage on your primary residence, that payment factors into your DTI. It's worth running the numbers before you shop, see our guide to alternative income documentation if your income picture is non-traditional.
At 14 Days To Close, we've helped Florida buyers finance primary homes, vacation properties, and investment rentals. We'll walk you through the rules and tell you upfront what product fits your situation.
