Vacation home dreams? 6 realities for second home owners to consider

There are several On the other hand, people who rent out their vacation home often find that it’s very time-consuming. In addition to It’s no wonder many vacation homeowners hire a rental management company to handle all those day-to-day tasks. Here are the seven best short-term rental management companies. 1. Vacasa The company focuses on whole-family rentals, including single-family homes, condominiums and townhomes. The hallmark of its offerings is 24/7 customer service for renters via phone or app and local management teams in case issues arise. For property owners, Vacasa’s sales and marketing services are a big draw. It provides 3D virtual home tours, professional photography and data-driven, dynamic pricing technology.  Pricing and fees Vacasa’s vacation property management includes a full-service deal, including bookkeeping, marketing and 24/7 guest support. However, pricing varies depending on the needs of the property and the local market. 2. Evolve Since launching in 2011, Evolve boasts a lower-than-average property management fee, starting at 10%. It comes paired with a “risk-free guarantee,” which says they only charge their management fee once bookings are secured. Like Vacasa, Evolve offers dynamic pricing and top-notch marketing. They also don’t limit personal stays, so you can enjoy your home as much as you want. Evolve has listings in destinations from California to New England, the Southwest to Pricing and fees As far as vacation rental management companies go, Evolve is one of the most affordable. However, they don’t include some basic services like cleaning or maintenance. 3. AvantStay If your property is on the larger side, you’ll want to take a look at AvantStay appeals to property owners with specific investment and financial goals and those who want top-notch service. Owners enjoy the services of a dedicated account manager, flexible contracts and included liability coverage. Perhaps the most appealing perk may be the Vacation Club membership, where property owners earn travel credits that can be redeemed for stays at other AvantStay properties.  Pricing and fees As one of the top management rental companies, AvantStay prices and fees mirror their upscale services. You’d need a quote for their package. 4. SkyRun A collective of independent vacation rental companies, SkyRun offers second-home owners two key differentiators. First, their preventative maintenance program uses regular inspections and smart home technology to ensure your home is in good working order for every guest. Second, they don’t charge new owners any onboarding fees.    Pricing and fees SkyRun is a collective of property managers and each may have their own pricing. You have to contact a vacation rental manager and get a quote.  5. Casago Casago is a smaller, Arizona-based property management firm with a combination of resort properties and individual homes in its portfolio. Management services are available in a focused set of locations, mostly Arizona, Southern California and Mexico. However, Their full-service property management includes marketing, filing of local and state sales taxes, utility payments and everything related to renter management, like check-in and check-out, cleaning, maintenance and monthly inspections.  Pricing and fees Casago’s vacation home management pricing depends on the size of the property. They use a commission-based structure. 6. Awning Its services include: guest communication, dynamic pricing and coordination of cleaning and maintenance. Availability and level of service can vary by market, and the platform is best suited for owners seeking a more analytical and structured management approach. Pricing and fees When it comes to vacation home property management, Awning has a distinct payment structure. They optimize their pricing according to various factors, such as the size and location of the property, to maximize returns.  7. Pacaso All maintenance, cleaning and management are handled by Pacaso, so there’s no need to chase rent payments or coordinate guest stays. This makes it the best vacation property management company for those who want the benefits of second home co-ownership without the responsibilities of hosting. Pricing and fees Pacaso’s home property management costs depend on various factors, particularly your share of the property. Pacaso budgets for the year, estimating your monthly costs.  Pros and cons of using a property management company  Hiring a property management company can be a smart move for vacation or second home owners who don’t live nearby or don’t want to manage day-to-day tasks. These companies take over responsibilities, such as guest communication, maintenance, cleaning and marketing. However, that convenience may be costly. Here’s a list of advantages and disadvantages to consider: Pros of using a property management company Undoubtedly, the biggest advantage of using a property management company is knowing that your property is in good hands and renters are being taken care of. You pay for peace of mind. Also, you may get: Cons of using a property management company The biggest owner gripe you’re likely to have about vacation home property management companies is the cost. Here are a few things to keep in mind: How to choose the right vacation home management company As you compare and contrast management companies, it can seem like they’re all offering the same core set of services. Here are a few things to consider when narrowing down your choices: Build equity while maintaining your lifestyle Renting out a second home can help offset co-ownership costs, but it also comes with effort: managing bookings, maintenance, and the unpredictability of guest income. And even with the best intentions, there’s no guarantee rental earnings will fully cover your expenses.  Pacaso offers a different approach. Through hassle-free co-ownership of vacation homes in top destinations, up to eight owners Find your luxury

Did you once dream of owning a timeshare fit for luxury vacations, only to have your fantasy ruined by high fees? If so, it’s time to learn how to get out of a timeshare with little to no financial damage. As you may already know, a Getting out of a timeshare is a notoriously difficult process that can quickly eat up your time and money. Read our guide to learn the top five strategies for how to get out of a timeshare, the associated costs and who would likely benefit most from each method. 1. Use the rescission period To take advantage of the rescission period, you’ll need to write a letter to the timeshare developers with the following information:  This is one of the cheaper options to get out of a timeshare, considering you only need to purchase a stamp to send your letter. For best results, consider sending a registered letter to ensure that the timeshare company receives your document. 2. Try a timeshare deed-back However, not all resorts and timeshare developers offer this option, and you may have to be in good standing with the resort to qualify for the program.  Even if this option is available, sometimes only major life events like job loss or death qualify. Before pursuing this option, check your contract to learn Examples of deed-back programs include: 3. Sell your timeshare on the resale market If your rescission period has expired and your timeshare developer doesn’t offer a buyback program, take matters into your own hands by selling your timeshare on the resale market. Keep in mind that this option may only apply to those who have completely paid off their timeshare. Timeshares still tied to loans will be listed as “encumbered.”   One of the major 4 A timeshare exit company is your likely last resort for getting out of a timeshare. If the other methods are unavailable, you should consider working with a company that specializes in complicated timeshare exit procedures. Since there are many timeshare exit company scams on the internet, here are a few tips for how to find a legitimate contender: Keep in mind that exit companies do what you can do yourself, but simply free you from the headache of communicating with the timeshare developers. Donating your timeshare to charity seems like an easy way out of those rising fees, and you might even get a tax write-off. But it's not free. You'll still pay maintenance fees, taxes, and transfer costs until the charity officially owns it. If you want a big tax deduction, you'll also have to pay for an appraisal. Some charities might even ask for a cash donation to help cover their future expenses. 6 These legal professionals can teach you how to legally get out of a timeshare. They will help you comb through your timeshare agreement(s) for loopholes like the recession period and deed-back programs. If you try to negotiate these terms on your own, a timeshare developer may try to sway you by offering “free” upgrades if you keep your timeshare.  However, each upgrade can generate a new contract that further complicates the exiting procedure. A contract law attorney can help you make sense of these contracts and mitigate the costs of exiting. Dos and don’ts when exiting a timeshare In many cases, If you want to learn how to exit a timeshare without spending thousands of dollars or falling prey to a scam, avoid these methods: Benefits of Pacaso vs. a Timeshare These five methods — each with a different cost and level of interaction with the timeshare developers — are ways to get out of a timeshare.  If you still want to enjoy a vacation property but skip the headache of timeshare ownership, consider becoming a Some Pacaso offers real estate ownership of a luxury property without the pitfalls of timeshares. Plus, unlike a timeshare, you can sell your home through a streamlined resale process if you decide to move on. If you don't want to deal with timeshare hassle, Pacaso is another option that offers true fractional ownership of a luxury home.

If you invest in a fractional ownership of a holiday home, you'd have the right to use that property for a predetermined number of days or weeks annually. This approach allows individuals to enjoy the benefits of owning premium assets without bearing the full financial burden alone. In this post, you’ll learn what fractional ownership is, explore its pros and cons and get answers to some frequently asked questions. Understanding fractional ownership You’ll typically find fractional ownership for real estate like vacation homes. However, fractional ownership can also come into play for art, stocks and fashion. When owners purchase real estate assets with fractional ownership, they’re issued deeds representing their fraction of the property.  How fractional ownership works It may sound complicated, but fractional property ownership is pretty cut and dry. Here’s how it works: Types of fractional ownership There are two main types of fractional property ownership structures: an entity, like an LLC, and tenancy in common. Fractional ownership through an entity Some properties split ownership by using a structural entity like an Tenancy in common Tenancy in common (TIC) means each tenant holds an individual deed for a fraction or percentage of a commercial or residential property. However, no one person or company is in charge. With a TIC, individuals can own different percentages of the property but share it equally. Some TIC agreements are self-managed. Fractional ownership vs. timeshares Timeshares may be shared by as many as 52 owners (one person or group for every week of the year) while fractionally owned properties can have as few as two owners.  Benefits of fractional ownership Fractional ownership has many benefits, including shared maintenance costs and upkeep, among others. Here are some of those benefits: Expanded opportunity to own Fractional real estate investments allow you to own a portion of Deeded ownership Unlike a timeshare, fractional home ownership gives you a deed to a fraction of the property itself (sometimes called a Usage rights Unlike short-term Shared upkeep and maintenance costs Using the fractional ownership model, you're also responsible for only a fraction of the property's upkeep and maintenance. This includes taxes, HOA fees, repair bills, landscaping, utilities, Lower upkeep and maintenance burden Most fractional real estate ownership agreements include provisions for long-term property management, with owners deciding how to handle any issues. Maintenance of When you have fractional vacation home ownership through an entity, it will include preventative and Cons of fractional ownership Though fractional ownership has advantages, there are a few drawbacks to consider.  Fewer financing options Fewer banks provide mortgages for those looking to buy properties fractionally. You may need to shop around or consider other ways to Less flexibility and freedom All decisions about maintenance, repairs and decor must go through all ownership partners, which can be a hassle. If you want to sell a fractional property, the other fractional owners must approve the sale, depending on your agreement.  Some fractional property ownership clubs also require you to maintain an agreement with the club or property management company associated with the home, with no option for self-management or management outside the company. Limited travel opportunities While it's not unheard of to own shares in multiple fractional ownership properties in different locations, investing in fractional ownership also means investing in the location you’re going to revisit. Of course, you can still vacation elsewhere, but it's something to factor into your travel plans and budget.  Similar alternatives to fractional ownership Where fractional ownership falls short, Pacaso steps up. Pacaso's professionally managed LLC co-ownership model gives you all the perks and lower co-ownership costs with key differences that set it apart from fractional ownership resort clubs. Unlike fractional ownership resorts, Pacaso offers LLC

You’re ready to buy another home, but are you aware of the Whether you’re searching for a dreamy beach house or a condo in the city that can earn you extra income, this guide will show you the pros and cons of owning multiple homes. Advantages of owning multiple homes  There are many advantages to owning multiple houses, starting with enjoying the perks of having It’s important to note that owning multiple homes comes with many responsibilities, such as 1. Earn rental income Owning multiple homes gives you the opportunity to create a sustainable and passive cash flow stream. Each additional property adds to the total rental income, which can help cover mortgage payments, property taxes, maintenance costs and other expenses associated with owning multiple rental properties. 2. Diversify your portfolio Rental income from multiple homes also offers diversification. It allows investors to spread their investments across various locations and 3. Enjoy a vacation home (or two) Perhaps the biggest advantage of owning multiple homes is the freedom to travel and make the most out of your properties. Whether Disadvantages of owning multiple properties  Although owning multiple homes can potentially help you earn extra income, diversify your portfolio and grant you access to new vacation spots, there are a few drawbacks to keep in mind. Let’s take a closer look. 1. Real estate is generally considered less liquid than stocks, bonds or cash. When you own multiple properties, it can be challenging to quickly convert those assets into cash if needed.  2. With each additional property comes a multitude of costs, such as mortgage payments, property taxes, insurance, maintenance, property management and utility bills. These expenses can add up quickly, putting a strain on your finances. If you buy and sell properties frequently, owning multiple properties may also lead to higher transaction costs, such as real estate agent fees and closing costs. 3. One significant disadvantage of owning multiple homes is the challenge of property management. As the number of properties increases, so does the complexity and time required to manage them effectively. With multiple homes, the workload and responsibilities can become overwhelming for individual owners, especially if you have to go through your Financing for multiple homes can vary depending on individual financial situations and investment goals. Traditional mortgages are common, but they may become limited as the number of properties increases.  Here are a few ways you can buy multiple properties: Regardless of the method, maintaining a strong credit profile and demonstrating a reliable income stream are essential to secure favorable financing terms and ensure you can By renting out the property to tenants, you can offset some of the However, successful rental income generation requires proper property management, including tenant screening, regular maintenance and prompt response to tenant needs. With careful planning and a proactive approach, using a second home as a rental investment can offer an attractive source of passive income.  Depending on how you’ll use the property, the tax considerations differ. Here’s a quick rundown: Consult with a qualified tax advisor who can provide detailed information based on your individual circumstances and The goal is to co-own homes without the hassle. Here’s the checklist you need to keep everything ready and organized: The weekend escapes, the family holidays, the familiar getaway spot — the idea of a vacation home sounds divine. Second homes come with a lot of perks, but also plenty of responsibilities. Between the upfront costs, ongoing maintenance, and time spent managing the property, full ownership isn’t the right fit for everyone. That’s where Pacaso comes in. Pacaso makes second home ownership more accessible by offering co-ownership of luxury homes in Here’s why Pacaso is a smarter way to own multiple homes: It’s the lifestyle upgrade without the financial overload. Just show up, relax, and enjoy your second home. Pacaso takes care of the rest. Now that you’ve got the full picture of how And unlike a timeshare, this model offers real estate ownership. And with a

A You might consider Understanding second homes vs. primary residences Although you might visit a second home for weeks on end, it’s only a personal residence for part of the year. It may be vacant or rented out to others the rest of the time. By contrast, lenders expect your primary residence to take priority because it’s where you live and sleep. You can also own more than one “second” home; a second home is a property Can you have two primary residences? Generally, no, you can't have two primary residences at the same time for tax or mortgage purposes. Even if you split your time between a couple of places, only one can be your official "main" home. This is where you spend most of your time, get your mail, register your car and list on official documents. Lenders offer better interest rates on primary residences because they assume you'll always prioritize paying the mortgage on the home where you actually live. Can a second home be a primary residence? In short, no. Why does occupancy status matter? Your occupancy status matters significantly because it directly influences your financing options, interest rates and how lenders assess risk. Lenders carefully consider how you plan to use a property, as this dictates your financing options. Your primary residence, where you live and sleep, is generally easier to get a mortgage for and typically comes with lower interest rates. Lenders see these loans as less risky, understanding you're highly motivated to keep the roof over your head. Second homes are a different scenario. Although you might visit a second home for weeks, it’s only a personal residence for part of the year. The rest of the time, it may be vacant or rented out to others. These properties typically come with higher interest rates and stricter qualification requirements. You can even use a It’s crucial to be truthful about your intended use when applying for a mortgage, as misrepresenting your occupancy can lead to serious consequences, including your lender demanding immediate full repayment, additional penalties and even bank fraud charges. You can also own more than one "second" home, as it's defined simply as a property secondary to your primary residence. Can you convert a second home into your primary residence? It's worth noting that a property's occupancy status isn't necessarily permanent; you can change a secondary residence into a primary one if it meets the necessary criteria. For instance, a retired couple might choose to downsize and sell their primary home to make their long-time second home their new primary residence.  Since your property's occupancy type directly impacts the specifics of your financing, it's always wise to consult your mortgage lender before making any such changes. Understanding the difference between a primary residence and a second home is important. Knowing the difference helps plan your long-term financial planning, property management responsibilities and even lifestyle choices.  For those seeking a luxury second home without the hassle and expense, let Pacaso make it simple with

Maybe you want to achieve your dream of For many, the most challenging part of purchasing a second home is finding the time to make it happen, especially when juggling the demands of a busy life. It's not just about the hours spent house hunting — it also includes the effort involved in securing financing, managing paperwork, and potentially overseeing renovations. The following nine strategies can help streamline the process and make your dream of a second home a reality, and the best one for you depends on what you plan to do with your first home. Option 1. Get approved for another mortgage Perhaps the simplest and most familiar strategy for how to buy a house when you own a house is to apply for a new mortgage. In this strategy, a bank approves you to hold two separate mortgages simultaneously. You’ll need to have enough cash on hand to cover a down payment and the closing costs for the new mortgage. Option 2. Become a landlord Similar to getting approved for two mortgages, as a landlord you are still responsible for two monthly mortgage payments, but the rental income can help cover your payments.  If you plan to rent out your second home, read your mortgage agreement carefully. Some mortgage agreements prohibit you from renting it out or require you to get the lender’s permission.  Once you’ve confirmed you can rent out your home, get it appraised to determine how much to charge for rent. The amount you charge should cover your monthly mortgage payment on the property. Your lender may also require you to have at least 2% of the mortgage value in investments, cash, etc., to cover the mortgage if you cannot get a tenant. Option 3. Take out a bridge loan A bridge loan is a temporary loan (usually six months to a year) intended to cover the cost of purchasing a new home while waiting for your current home to sell. Also called a swing loan, a bridge loan can finance up to 80% of the value of both your new and current home. When your current home sells, you use the profits to pay back the entirety of the bridge loan and apply for a traditional mortgage for your new home. Option 4. Borrow from your investments Generally, you cannot withdraw from your retirement investments without paying a penalty (usually 10%) and potentially taxes on the amount you withdraw. However, you may be able to You must repay the loan with interest within five years. Some employers may also prohibit you from contributing to your account while repaying a loan. If you have a Roth 401(k), you can withdraw any contributions from your retirement account without penalty. If you borrow any earnings that your contributions accrued, however, you will have to pay a 10% early withdrawal penalty. Option 5. Get a home equity loan A home equity line of credit allows you to borrow against the equity in your home, but it’s not a full balance loan like a home equity loan. Instead, it’s a line of credit you can draw from over time, like a credit card limit. If you have enough equity in your home, you can use your HELOC to cover the entire Option With a cash-out refinance, you refinance the entire value of your home up to 80% of its equity. Whatever you don’t owe on the mortgage, you’ll receive in cash. For example, if you have $100,000 left on your mortgage but the home has $500,000 in equity, you’d be able to refinance up to $400,000. You would walk away with $300,000 in cash to put toward the purchase of your second home. Option If you are 62 or older, you may qualify for a reverse mortgage. Also known as a home equity conversion mortgage (HECM), a reverse mortgage allows you to borrow from your home’s equity without making monthly payments — with the expectation that you will pay back the loan when you sell your home.  Option 9. Explore other types of ownership There are other Get the best of both worlds with co-ownership For those dreaming of that perfect vacation retreat,

Forget everything you thought you knew about vacation property. A quiet revolution is reshaping how we own a piece of paradise, challenging the long-held reign of the While fractional ownership and timeshares promise regular getaways to your dream destination, vacationers want something more. One model offers genuine Is fractional ownership the same as a timeshare? Fractional ownership is not the same as a timeshare because it means you actually own a piece of the property, giving you an equity stake that can change in value. You also get more usage time, often weeks or months, in typically higher-end properties like luxury homes. Timeshares, on the other hand, are just a right to use a property for a short period (usually a week) with no actual ownership or equity gained.  What is a timeshare? Timeshares are a way to buy the right to use a vacation property for a specific amount of time. That means no true property ownership and no gained equity. In most cases, buying a timeshare means paying for one week-long access to a condo, apartment or resort room.  The What is fractional home ownership?  While timeshares might restrict property access to just a few weeks annually, fractional property ownership often grants owners access for multiple weeks a year, contingent on the number of joint owners. Because these units have fewer owners than timeshares, fractional owners often have more of a say in decisions regarding property maintenance and upkeep. Many fractional properties also offer on-site storage for owners. Timeshare vs. fractional ownership: 8 differences Unlike short-term rentals, both timeshares and fractional ownership properties allow you to own part of your vacation experience. Although they share this similarity, these ownership models differ in seven key ways. 1. Number of owners The number of owners is an important factor to consider, since fractional owners may have to communicate and share decision-making responsibilities. Here is what to expect with both vacation ownership models: 2. Scheduling availability As a co-owner, you’ll need to be cognizant of when the shared home is available to book. The number of days or weeks the home will be available largely depends on how many owners there are. Here is what potential scheduling availability could look like for both options: When thinking about it in real-life terms: 3. Equity benefits A Here’s how this shakes out in real life: 4. Management Vacation homeowners can choose to share property management, hire a Here’s what management looks like for both:  5. Maintenance  Similar to management, Here’s what you can actually expect in these situations:  6. Building  One of the biggest differences between fractional ownership of a vacation home and timeshares is the type of structure you’ll be staying in. Here is what to expect: To think about this in the real world:  7. Cost Fractional ownership costs a lot more upfront because you're actually buying a share of a high-end property. Timeshares are cheaper to start, but you only get the right to use the property for a short time. Also, you'll pay ongoing fees that determine how much the average timeshare is per month, often between $140 and $500.  A real-life example looks like this: 8. Resale value  The resale process can look different for both ownership models. Here is what to expect when you’re ready to sell your vacation property: When thinking about this in real life: Other popular vacation options Timeshares and fractional ownership models aren’t the only ways to enjoy a vacation property. Let’s take a look at other popular vacation options like private residence clubs and destination clubs. Private residence club Private residence clubs are similar to fractional properties in that both offer Entry-level prices start at around $165,000 at the lower end of the market, and can easily exceed $800,000 for a private club in a Destination club A destination club grants members proprietary access to its services, which means high-end vacation homes on a non-equity basis in various locations around the world. Members eschew a traditional mortgage payment in favor of membership tiers that offer personalized services and amenities. Inventory is based on availability and can sell out quickly during peak times in popular areas. The Pacaso difference Pacaso’s professionally managed When it comes to fractional ownership vs. timeshare vacation home options, there are pros and cons to both models.  Owning a timeshare comes at a lower price, but you only own the block of time that you’re able to vacation there and will not benefit from equity. Private residence clubs and destination clubs are also worthy contenders for people who aren’t interested in a But if owning a portion of a real estate asset is what you’re looking for, then fractional ownership may be for you. With a

A letter of explanation can be a key to qualifying for home loan funding. If an underwriter requests a letter of explanation, welcome it as an opportunity to clarify your financial situation and clear up any confusion about your credit history or assets. Whether you're applying for a mortgage for your first or second home, writing a letter of explanation can be vital in securing funds. Our guide will teach you how to write a letter of explanation, plus offers a free template to help you write one of your own. What is a letter of explanation? A consumer explanation letter, also known as a "Letter of Explanation," is a concise document designed to clarify specific aspects of someone’s financial or employment history. Letters of explanation are particularly useful when an underwriter has concerns during the loan or mortgage application process. It addresses issues such as past bankruptcies or gaps in employment, ensuring a transparent and comprehensive understanding of the applicant's financial standing. Underwriters examine your financial history and determine if you qualify for the home loan you’re applying for. Since loan applications don’t include space for explanations, an underwriter may request that you submit a letter of explanation as evidence that you meet the funding criteria. Why do you need a letter of explanation? There are several reasons why an underwriter or mortgage lender may request a signed letter of explanation, particularly when it comes to a 1. You have a poor credit history Your credit history helps lenders know how you’ve handled debt in the past. The following red flags can potentially indicate poor debt management and may require a letter of explanation: If your credit score is low, it may be in your best interest to have a letter of explanation on standby. Share how you got negative marks on your credit history, and explain why you are still a good candidate for the loan. 2. You don’t have rental history Ideally, lenders want to see that you have a consistent rental history for the last 12 months. This reassures them that you will be able to handle regular mortgage payments.  If you have a gap in your rental history, explain the cause. Caring for a family member or recovering from an accident are possible explanations for a rental hiatus. 3. You have employment gaps Similar to your rental history, lenders prefer to see consistent employment in the year before your loan application. This shows the lender that you have the income to make regular mortgage payments. A lender can be flexible when they know more about the circumstances that led to an employment gap. Being laid off or raising children are possible explanations for the lack of recent work experience. 4. You report different addresses If the address on your driver’s license does not match the address on your loan application or credit report, a lender may ask you to explain the discrepancy. 5. Your income is inconsistent Underwriters will carefully review your income. If it fluctuates often, they may request an explanation letter. If you are self-employed, your accountant may also have to write a letter of explanation to verify how you generate your income. You might also find it helpful to use a 6. You work remotely If your remote career is tied to an address in a city or state that is different from where you are buying a home, especially if that home is intended to function as a second home office, a lender may request that your company provide a letter of explanation verifying that your career (and income) will not be affected by your move. This situation is becoming increasingly common with the rise of “ 7. You have substantial losses on your tax return If you are a self-employed business owner or independent contractor, it’s normal to file losses on your first few tax returns. A lender may request a letter of explanation to ensure that these losses will not be consistent and will not affect your ability to make regular mortgage payments.  8. You cosigned a loan In the event that you cosigned a loan, a lender will want an explanation letter ensuring that you are not the one making the payments. This can apply to student loans, auto loans and mortgages, even for a 9. You opened a new credit account If you open a new credit account while applying for a mortgage loan, a lender may suspect that the debt could affect your ability to repay your loan. Remember that the underwriter will also review your finances during closing, so hold off on opening new lines of credit until the sale is complete, if possible. 10. Your family members are on your bank statements If multiple people appear on your bank statements, like parents or children, you will need to write a letter explaining that you’re in control of the funds being used to pay for your new home. Anyone who helps you with the down payment of the home will also be responsible for writing a gift letter of explanation. 11. Your accounts are under fraud alert A lender will want to know that you’re aware of any suspicious activity on your credit report. If your accounts are under fraud alert or your credit is frozen, prepare a letter of explanation that outlines how you will regain control of your finances. How to write a letter of explanation Before you write a mortgage letter of explanation, you’ll need some information first. Some of this you’ll have readily available (like your name), but you might have to gather or research other details, such as specific dates or documentation related to the situation you're explaining. Some of the common pieces of information you’ll need include:  Once you have your personal information on standby, you can construct a thoughtful explanation letter detailing your circumstances and readiness to be a homeowner. Here is how to write an explanation letter: Keeping your explanation letter short and sweet is key. If you're struggling to write a concise letter of explanation, model yours after our letter of explanation sample. Letter of explanation template A credit letter of explanation request is no cause for panic. Here is a letter of explanation example to help point you in the right direction: Writing a letter of explanation can get you one step closer to While you're exploring options for financing a second home, consider the possibilities of fractional ownership. This type of ownership can help you afford more home for less and reduce the amount of mortgage you are responsible for paying.  With a fully managed co-ownership model like Pacaso, you leave behind many of the costs of buying a second home like maintenance, upkeep and furnishings. Plus, Pacaso offers flexible financing options.  Refer back to our free template if you need help preparing an explanation letter for your next real estate purchase. And don’t forget to