Dreaming about a pied‑a‑terre in Condado or a beach escape in Isla Verde but unsure how banks size up second‑home loans in San Juan? You are not alone. Lenders follow a clear rulebook for vacation properties that is different from primary homes and rentals. This guide breaks down what banks expect in San Juan, from down payments and reserves to insurance and condo rules, so you can plan with confidence. Let’s dive in.
What lenders mean by “second home”
A second home is a one‑unit property you occupy for part of the year and is suitable for year‑round living. It cannot be a timeshare or be controlled by a management company that dictates occupancy. Lenders also confirm it is not primarily a rental or investment property. See how GSEs define second‑home occupancy in the Fannie Mae Selling Guide.
How banks size up you and the loan
Credit, DTI, and income
Most conventional programs look for strong, documented credit and steady income. A typical minimum credit score is around 620, and automated underwriting may allow debt‑to‑income ratios near 45 to 50 percent with solid compensating factors. Expect full documentation: recent pay stubs, W‑2s or tax returns, and verification of assets and any other mortgages.
Down payment, rates, and PMI
Second‑home loans often require a larger down payment than primary homes. Many programs start around 10 percent down, and rates are usually priced a bit higher than primary residence loans, often by about 0.25 to 0.50 percent, depending on your profile and market conditions. For loans above 80 percent loan‑to‑value, lenders may require private mortgage insurance; availability and pricing vary by product and insurer. For practical comparisons on down payments and rate differences, review this overview from The Mortgage Reports, and for PMI basics see Fannie Mae’s consumer guide.
Cash reserves
Banks expect you to have liquid reserves for second homes. Fannie Mae’s baseline guidance calls for about two months of mortgage reserves for a second home, with more required if you carry additional financed properties. See minimum reserve requirements.
Property rules banks check
- The home must be a one‑unit dwelling suitable for year‑round occupancy.
- It cannot be a timeshare or subject to an agreement that cedes occupancy to a third‑party manager.
- Condos in tourist areas may face tighter project reviews, lower maximum LTVs, and extra insurance documentation. Review condo project considerations.
- Appraisals or approved valuation alternatives are required. Lenders look for stable, local comparable sales and market liquidity.
San Juan specifics that affect approval
Conforming limit and jumbo
Puerto Rico follows FHFA conforming limits. For 2025, the baseline 1‑unit limit was $806,500, which helps determine whether your loan is conforming or jumbo and which rules apply. Check the current loan limits before you shop.
Insurance is non‑negotiable
Lenders require hazard coverage that addresses wind and hurricane risk. If a standard policy excludes wind, you will need an endorsement or separate policy. If the home sits in a FEMA Special Flood Hazard Area, flood insurance is required. Learn how Puerto Rico policies handle wind and hurricane coverage from MAPFRE Puerto Rico. Insurer appetite and pricing can shift, so banks often verify sustainable coverage at closing and during servicing; regulators have flagged this as an industry focus in coastal markets. See the FDIC’s perspective on wind and hazard insurance oversight.
Short‑term rentals and lender view
Banks underwrite second‑home loans assuming personal use, not a short‑term rental business. If you plan to host guests, disclose it early. Different loan products or added documentation may apply, and local attention to STR regulation is evolving. For context on Puerto Rico’s STR growth and policy discussions, see AP News coverage.
Title, closing, and language
Puerto Rico uses the Registro de la Propiedad for property recording, and many closings use Spanish‑language documents executed before a notary. Lenders will want a title commitment from a local provider and may adjust timelines compared to mainland practice. Work with a team that knows San Juan closings from contract to recording.
FHA and VA occupancy rules
FHA financing is designed for primary residences and generally cannot be used for a vacation home. VA loans also carry occupancy expectations. If you need low down payment options, your primary‑residence plan matters. Review FHA occupancy guidance from HUD.
Act 60 and your mortgage file
Act 60 offers tax incentives to bona fide residents, but it does not change how banks underwrite a second‑home loan. Lenders still review where you file taxes, income sources, and your ability to repay. Plan documentation accordingly.
Your San Juan second‑home loan checklist
Use this quick list to stay organized:
- Signed purchase contract and completed loan application noting “second home.”
- Government ID and Social Security number; authorization to verify credit and income.
- Income docs: last 30 days of pay stubs; 2 years of W‑2s and, if self‑employed, 2 years of federal tax returns.
- Assets: 2 to 3 months of bank and investment statements showing down payment and required reserves.
- Mortgage statements and leases for any other properties you own.
- Appraisal or lender‑approved valuation.
- Insurance: homeowners policy with wind/hurricane coverage; flood policy if applicable. Binder must name the lender as mortgagee.
- For condos: bylaws, meeting minutes, budget, reserves, master insurance, and any rental rules.
- Title commitment from a Puerto Rico title provider; wire closing funds per lender instructions.
Smart preparation for San Juan buyers
- Get preapproved early and confirm how the lender classifies your occupancy.
- Price insurance before you waive contingencies, especially for coastal condos and older buildings.
- Review condo documents and project reserves before you go firm on a deal.
- Plan for a 10 percent down payment or more and set aside the cash reserves your lender requires.
- Be transparent about any rental plans to avoid last‑minute loan changes.
- Align your closing timeline with local notary and registry practices.
Common pitfalls to avoid
- Assuming a primary‑residence program applies to your vacation purchase.
- Underestimating wind or flood insurance costs.
- Skipping condo project due diligence in tourist districts.
- Forgetting about cash reserves when calculating funds to close.
- Not disclosing short‑term rental intentions to your lender.
Buying a second home in San Juan can be smooth when you understand the bank’s playbook and prepare your file the right way. If you want local guidance on neighborhoods, condo projects, and the financing steps that win approvals, reach out to Vin Forbes for a focused plan.
FAQs
What is a “second home” for lenders in San Juan?
- A one‑unit property you occupy part of the year that is suitable for year‑round use, not a timeshare, and not primarily a rental.
How much down payment do banks expect for a San Juan second home?
- Many conventional programs start around 10 percent down; some condos or products may require 20 percent or more. PMI may apply above 80 percent LTV.
Do banks require hurricane or flood insurance for San Juan properties?
- Yes. You need hazard insurance that covers wind and hurricane, plus flood insurance if the home is in a FEMA Special Flood Hazard Area.
Can you use FHA to buy a vacation home in San Juan?
- Generally no. FHA is for primary residences, and VA loans also carry occupancy requirements.
Are condos in Condado or Old San Juan harder to finance as second homes?
- Often. Tourist‑area condos can trigger tighter project reviews, lower max LTVs, and more insurance and financial documentation.
What is the 2025 conforming loan limit in Puerto Rico?
- The baseline 1‑unit limit was $806,500, which helps determine whether your loan is conforming or jumbo.
