Minimum Down Payment for a Second Home (and How to Save)

You typically need at least a 10% minimum down payment for a second home. However, some lenders may require down payments as high as 15% or 20% on a second home. Jumbo loans for more expensive homes can require down payments over 20%.

In addition to the down payment, you must also meet lending requirements for income, cash reserves, and employment stability. Second-home loans are riskier for lenders, so the borrowing requirements are generally stricter than those for first-home mortgages.

"Most buyers believe that since they qualified for their first home, they'd have no issues qualifying for a second home at the same price point," notes Justin Chau, a realtor who's worked with many second home buyers. "However, this is unfortunately not the case, unless they have saved up a large down payment or have significantly increased their income."

However, second homes are not the same as investment properties, which have even higher lending and credit thresholds. VA loans typically cannot be used to buy second homes due to primary occupancy requirements.

Second home vs. investment property

Second homes are not synonymous with investment properties. A second home is a home the buyer intends to occupy for part of the year and visit regularly. Investment properties, on the other hand, are meant to generate income and are primarily occupied by tenants.

Government-sponsored enterprises (GSEs), like Fannie Mae and Freddie Mac, define conditions for a property to count as a second home and not an investment property.

Lenders treat investment properties differently because they are meant to generate rental income and come with more risk. As such, interest rates and down payments for rental properties are higher.

You can do short-term rentals with a second home. However, you can only rent out your second home if you occupy it for at least 14 days out of the year or 10% of the time you rent it out. Otherwise, the IRS may classify it as an investment property.

Minimum down payment by scenario

Since you already have a first home, lenders see second-home purchases as riskier and so have higher down payment and eligibility requirements, depending on the type of loan you get.  

1. Conventional loan

The typical minimum down payment for a second-home conventional loan is 10%. This is the minimum down payment for a dwelling that meets GSE second-home rules. You must also meet specific credit requirements and have enough cash reserves to cover between two and six months of mortgage payments. 

Additional overlays from lenders can push down payment requirements as high as 15% to 20%. In most cases, a down payment below 20% on a conventional loan means you’re required to pay for private mortgage insurance (PMI). 

2. Jumbo second home loan

Jumbo loans or jumbo mortgages are private home loans that exceed the FHA’s lending limits. Because jumbo loans are used to finance expensive properties, borrowers must have substantial finances and a low debt-to-income ratio. 

For a jumbo loan for a second home, you can expect to pay at least 20% for a down payment, though some buyers may have to pay up to 30% or even 40%. 

3. Investment property

Investment properties that don’t meet second home requirements are subject to higher down payment requirements, typically starting between 15% and 25%. Generally, down payments for single-unit rental properties are lower than for multi-unit rental properties. 

4. Gift funds

Freddie Mae and Fannie Mac allow borrowers to use gift funds from acceptable donors to cover the down payment on a second home, but there is a catch. 

If the loan-to-value (LTV) is greater than 80%, the borrower must personally contribute 5% to the down payment before they can use the gift funds.

Credit, DTI, and reserves you’ll need

Below are GSE minimum guidelines for credit, debt-to-income (DTI), and cash reserves for second home purchases. Requirements may be higher, depending on the specific lender.

Credit

There is a general credit score floor of 620 for loans with an LTV lower than 75%. For LTVs higher than 75%, credit requirements can be as high as 680 or even 720, depending on debt and cash reserves.

DTI

Borrowers typically need a maximum DTI of 36% to qualify, though borrowers can exceed the maximum up to 45% if they have a good credit score and adequate cash reserves.

It is still possible to get a loan with a higher DTI, but you may have higher monthly payments or need a higher credit score/substantial cash reserves.

Cash reserves

Lenders require borrowers to have adequate cash reserves to cover at least two months of payments. These are liquid funds that can cover monthly principal, interest, taxes, insurance, and fee payments.

Cash reserve requirements can stack if you have multiple financed properties, and investment properties can require up to six months of reserves.

PMI on second homes: When it applies and how to avoid it

If you make a down payment of less than 20% on a conventional mortgage, you will most likely have to pay for private mortgage insurance (PMI). Insurance premiums are rolled into your monthly payment and equal about 0.5% to 1% of the remaining loan balance.

One way to avoid PMI costs is to use an 80-10-10 mortgage, more commonly known as a piggyback loan.

Here is an example of how this works: Say you want to buy a $400,000 home and can make a 10% ($40,000) down payment. With a 10% payment, you’ll have to pay monthly PMI premiums.

To avoid this, you can:

• Take out a loan for 80% of the home value ($320,000).
• Get a second loan for 10% ($40,000).
• Make the 10% ($40,000) down payment.

Since you meet the 20% down payment threshold, you won’t have to pay for PMI. You can also stop paying PMI once your equity in the house reaches 20%. However, you have to send a written request to your lender asking them to remove the PMI from your loan.

Can I use a VA loan on a second home?

VA loans have strict primary residence requirements, so you typically can’t use them to buy a second home or vacation property.

You can use a VA loan to relocate, but you must move into the new home as your primary residence within 60 days of the sale. If you violate the VA’s primary residency requirements, you could be required to repay the loan in full all at once, plus penalties and interest.

Costs beyond the down payment

The down payment is not the only upfront cost to buying a home. You’ll also need to deal with closing costs, which include origination, underwriting, processing, and attorney fees.

Property taxes are typically added to your monthly payment and kept in a separate escrow account that your lender uses to pay the IRS each year. Your annual tax burden can vary significantly depending on the state where you live.

You’ll also have to contend with higher interest rates. The average 30-year rate for primary mortgages is about 6.3% as of 2025, and rates for second homes can be anywhere between 0.5% and 1% higher.

Lastly, condo buyers will have to contend with HOA fees and additional insurance costs. Lenders also usually have higher cash reserve thresholds (>10%) to guard against project eligibility risks inherent to condos and similar co-ops.

How to lower the cash needed up front

Down payment requirements are often a significant hurdle to buying a second home, as it can be tough to find the liquid cash. Below are some strategies to lower the upfront down payment cost.

Home equity loan/HELOC

You can secure a home equity line of credit (HELOC) to make the down payment on your second home. Another option is to get a second mortgage or a cash-out refinance on your current mortgage and use the proceeds to cover the down payment.

Gift funds or equity gifts

You can use gift funds to cover a down payment, but you’ll have to personally contribute 5% if the LTV is greater than 80%.

Piggyback loans

You can use a piggyback loan structure to meet minimum down payments and potentially avoid PMI requirements.

Note, however, that you’ll have two monthly mortgage payments with different interest rates. Piggyback loans usually have an adjustable rate, so costs can vary month to month.

Step-by-step: Qualify for a second-home loan

You can use the following checklist to estimate your qualifications for a second home loan:

• Verify home eligibility. Determine whether the home must meet GSE second home mortgage requirements (e.g., single-unit, occupancy requirements, no rental income, etc.).
• Document income. Qualifying income for mortgage calculations includes standard W2 wages/salary, bonuses, Social Security/disability income, retirement/pension income, alimony/child support, and unemployment benefits. 
• Down payment. Different down payments can lower monthly PMI costs and make eligibility more likely. For instance, a down payment of 15% on a $350,000 loan instead of 10% can reduce monthly PMI costs by as much as $120. A 20% down payment can eliminate the need for PMI. 
• Check credit and DTI. Typical minimum GSE requirements for a home are a credit score between 620 and 680 and a DTI between 36% and 45%. 
• Confirm reserves. Cash reserves must be sufficient to cover between two and six months of payments, depending on personal financial factors and loan size.
• Compare lender overlays/jumbo options. Lender overlays can increase minimum loan requirements above the minimum guidelines, so be sure to compare multiple offers to increase your odds of qualifying.

The bottom line

You can expect to pay at least a 10% minimum down payment for a second home, but lender overlays can increase down payment requirements to 15%-20%.

For jumbo loans higher than FHA lending limits, down payment requirements can vary between 20% and 40%, depending on financial factors.

The right agent can help you find a second home with down payment parameters that fit your finances. You can use List with Clever to connect with top local agents and see if you qualify for cash back!

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