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Advice For Second-Time Home Buyers: What To Know

April 18, 2024 8-minute read

Author: Melissa Brock

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If you’re a second-time home buyer, buying a home may seem like a cinch since you’ve done it before.

However, the experience of buying a house for the second time can differ in various ways from your experience as a first-time buyer. You may also wonder about second-time home buyer requirements and programs and how they’re similar to and different from what you encountered as a first-time home buyer.

Before diving into your second go-around with homeownership, take a couple of minutes right now to find out everything you need to know.

Is It Easier To Buy A Home The Second Time?

For many people, buying a home for the second time is easier than purchasing their first home for the simple reason that they have a better idea of what to expect. That’s not to say that life as a second-time home buyer is necessarily a cakewalk, however.

Let’s take an in-depth look at how the second time may look totally different from the first time around as a home buyer.

You May Be Buying And Selling At The Same Time

Simultaneously selling and buying a home means you may be responsible for two mortgage payments and managing the care of both properties, at least for a short period of time. Or you might close on the first house but have nowhere to live for a while because you haven’t finalized the purchase of a new home.

If you can’t afford to buy a home without selling your original property first, you may have trouble wrangling the money you’ll likely need for the second-time home buyer down payment.

But a home equity loan or a bridge loan can help bridge the gap between selling one house and buying another. You can repay this type of personal loan when you close on your old home.

Note that Rocket Mortgage® doesn’t currently offer bridge loans.

Housing Prices May Have Changed

Housing prices ticked up ever so slightly in early 2024 from late 2023. According to the Federal Reserve Bank of St. Louis, the median home sales price in the U.S. was $417,700 in the fourth quarter of 2023. This increased in January 2024 to $420,700 before a drop to $400,500 in February in a report provided jointly by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

While at the moment, prices are falling, the volatile nature of the housing market is evident in these statistics. Housing prices can change at any time, so you may be looking at a different market when you start the home buying process for your next home.

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The Real Estate Market May Have Changed

The real estate market may have also changed since you last went through the home buying process.

For example, over the past few years, low inventory has plagued home buyers in many areas of the country, meaning that many homes get taken off the market quickly. If you’re a newbie to this market, you may realize you need to prioritize what you want in a home – and let the rest go, especially if you know you can live without certain features.

In addition, getting preapproved for a mortgage is a must in this market. With a preapproval, a lender tells you approximately how much money they’re likely to let you borrow to purchase a home.

Over the past couple of years, the real estate market has seen interest rates jump. For example, the average interest rate for a 15-year fixed-rate mortgage jumped from 2.8% in February 2022 to 6.7% in March 2024. A 30-year fixed-rate mortgage, meanwhile, increased from 3.6% in February 2022 to 7.6% in March 2024.

Online Home Buying Has Grown In Popularity

The popularity of online home buying has increased in recent years. There are now a few new ways to purchase homes, which might change how you buy your next home. As a result, you may face increased competition, pay more fees or both.

For example, third-party buyers such as Orchard and Knock charge additional service fees but handle inspections and home showings. Virtual agents such as Redfin, which aim to reduce the costs of using a traditional real estate agent, have also popped onto the scene.

You may even be able to use virtual documents – such as electronic signature apps and online notary services – for buying and selling.

You can even get preapproval entirely online. You can get a Prequalified Approval, in which Rocket Mortgage quickly verifies your credit and debt and estimates your income and assets. Another option is Verified Approval, where the loan officer pulls your credit, W-2s, tax returns, bank statements and pay stubs. Verified Approval offers a stronger approval because it’s a more accurate estimate of how much home you can afford.

Second-Time Home Buyer Requirements

Second-time home buyers must meet some of the same requirements that first-time home buyers must meet.

  • Credit score: Your credit score always matters when purchasing a home. This number can range from 300 – 850, and it reflects how well you’ve handled debt in the past. The higher your credit score, the more likely you are to receive a lower interest rate on your mortgage, saving you money over the years you pay on your loan. Lenders typically look for a credit score of 620 or higher for a conventional loan.
  • Debt-to-income ratio: Debt-to-income ratio (DTI) compares your gross monthly income against the amount you fork over in monthly debt payments. In general, you need a DTI of around 43% or less to qualify for a loan, but some lenders and loan programs offer more flexibility. For example, if you’re offered a VA loan or an FHA loan (a loan backed by the Department of Veterans Affairs or the Federal Housing Administration, respectively), you may qualify with a higher
  • Down payment: A down payment is the amount you pay upfront for a home purchase. A second-time home buyer down payment is a percentage of the purchase price, just like with your first mortgage. Your down payment directly impacts your interest rate – a larger payment means a mortgage lender will consider you a less risky borrower and you may receive a lower rate.

Income requirements: Your lender needs to know that you can afford to make your mortgage payments each month and over time, and they do this by ensuring you have enough income and assets. For example, your lender will look at your W-2s, pay stubs, bank account statements and income tax returns to verify that you have your finances in order.

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6 Tips For Second-Time Home Buyers

What else do you need to know about purchasing a home for the second time? We'll take a look in the next sections. 

1. Explore Second-Time Home Buyer Programs

Many may think assistance is only available for first-time home buyers. However, assistance programs and grants are also available for second-time home buyers. Look at the United States Department of Housing and Urban Development (HUD) local home buying programs guide to learn about the types of assistance available to you. You can often sort by town or county to find assistance programs available to you.

2. Know Your Loan Options

The type of mortgage used to buy your first home may not necessarily be your best option as a second-time home buyer. Therefore, you may want to look into a different loan option, such as an FHA loan, conventional loan or VA loan:

  • FHA loans: FHA loans, backed by the Federal Housing Administration, allow you to apply for a loan (even for a second purchase) with a lower credit score, lower down payment and financial issues in your history.
  • Conventional loans: Conventional loans are not backed by a federal entity, unlike FHA and VA loans. Conventional loans require at least a 3% down payment, though you'll have to put down at least 20% if you want to avoid paying private mortgage insurance (PMI), a type of insurance that helps protect your lender against default (AKA if you may stop paying on your loan). You'll typically need at least a 620 credit score to qualify for a conventional loan as well as a DTI of 43% or below.
  • VA loans: VA loans are a government loan backed by the Veterans Administration for eligible veterans, service members and surviving spouses. You can qualify with a lower credit score and zero down payment.

3. Find A Lender You Trust

You may also want to consider whether you want to switch lenders – there’s no rule that says you have to keep the same one you used with the purchase of your first home. Consider how much it will cost you to get a loan with a particular lender. For example, what are the fees and payments, mortgage terms, types of loans and mortgage points (which allow you to “buy” a lower interest rate)?

Check on the interest rate and APR as well as mortgage rate locks, which let you “lock” your mortgage interest rate for a particular amount of time prior to receiving your loan. You’ll also want to consider the lender’s down payment requirement and closing costs as well as the loan programs they have to offer. Also, be sure to find out if you’ll owe a prepayment penalty if you pay off your loan early.

Learn more about how to choose a lender, even for the second time.

4. Consider Using Your Home Equity Toward A Down Payment

It’s a good idea to consider your current home equity and whether you should use it as payment for your new home. Tapping into your home equity remains a viable option for second-time home buyers.

Put simply, your home equity is the value of your home minus any remaining loan balance. Once you’ve been in your second home for a few years, or if you decide not to buy a second home just yet but remain in your first home for a while longer, you may want to opt for a cash-out refinance, home equity loan, home equity line of credit (HELOC) or reverse mortgage (if you’re age 62 or older) – all of which tap into your home equity.

5. Look For Houses Online

Searching online can be a good place to start looking for a new home. However, it’s still wise to work with a real estate agent when you’re ready to see properties in person.

6. Decide What You Want From Your New Home

Finally, decide what you want in your new home. As a second-time home buyer, you’re fully aware of what you like and what you don't like about your current home. You may or may not make the same choices the second time around that you did the first time around.

Make a list of “must-haves” and “can-live-withouts” when you put together the requirements for your new home. The answers to these questions and help from a trusted real estate agent and lender will help you put all the pieces of the puzzle together.

Get approved to see what you can afford.

Rocket Mortgage® lets you do it all online.

The Bottom Line: Approach The Home Buying Process With Confidence

If you’re already a homeowner, you’re in a great position to consider what you want for your second home. You can navigate your second home buying experience with the knowledge of a veteran. What should you change the second time around? Sometimes, experience is the best teacher.

Ready to finance a new home? Get started online today with Rocket Mortgage.

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Melissa Brock

Melissa Brock is a freelance writer and editor who writes about higher education, trading, investing, personal finance, cryptocurrency, mortgages and insurance. Melissa also writes SEO-driven blog copy for independent educational consultants and runs her website, College Money Tips, to help families navigate the college journey. She spent 12 years in the admission office at her alma mater.