Thinking about a sunny getaway base in Delray Beach and wondering how to finance it? Second‑home rules and costs shift over time, and 2025 brings a few changes that may work in your favor. You want clear guidance on loan limits, how lenders view second homes, and local rules that affect your budget. This guide breaks down what changed, what it means for you, and the steps to take before you write an offer. Let’s dive in.
What changed for 2025
The big update is the higher conforming loan limit. For 2025, the Federal Housing Finance Agency raised the baseline one‑unit limit to $806,500. Palm Beach County, which includes Delray Beach, follows this baseline. That means more second‑home purchases here can fit into conforming loans rather than jumbo financing. The FHFA announcement outlines the new limits.
Why it matters: loans that fall within conforming limits often come with broader lender options, easier qualifying, and potentially better pricing than jumbo loans. If your target home would have required a jumbo loan last year, it may now qualify as conforming.
How lenders define and qualify a second home
Lenders use clear rules to classify a second home. Fannie Mae defines a second home as a one‑unit property you will occupy for part of the year, suitable for year‑round use, and under your control. It cannot be a timeshare or subject to third‑party occupancy control. Importantly, rental income from a second home generally is not used to qualify. Review the details in Fannie Mae’s second‑home definition.
Down payment and reserves
Conventional second‑home loans often require at least 10 percent down, and many buyers choose 20 percent to avoid private mortgage insurance. Expect lenders to want cash reserves too. Fannie Mae’s automated underwriting typically calls for at least two months of PITI on second homes, though some borrowers may need more based on their profile. See Fannie’s minimum reserve requirements.
Credit and DTI expectations
Because second homes carry more risk for lenders than primary residences, you should plan for stronger credit scores and tighter debt‑to‑income ratios. Exact thresholds vary by lender and product, so ask your lender for scenario‑specific guidance.
Short‑term rentals can change classification
If you plan to operate the home as a short‑term rental, many lenders will treat it as an investment property rather than a second home. That typically means higher down payments, more reserves, and different pricing. Be transparent about your intended use and confirm condominium or HOA rules before you apply. Fannie’s occupancy guidance explains why use matters.
Delray rules if you plan to rent
If you intend to rent your second home, even part‑time, you must follow state and county rules:
- State licensing: Florida’s Department of Business and Professional Regulation requires licensing for vacation rentals under certain patterns of short stays. Review the state’s vacation‑rental overview to see if your plan triggers licensing in the DBPR guide.
- County taxes: Palm Beach County requires hosts who offer stays of six months or less to register for the Tourist Development Tax (6 percent) and obtain a Local Business Tax Receipt. Learn more on the county’s Tourist Development Tax page.
City zoning and neighborhood rules also apply. Confirm Delray Beach zoning and any HOA or condo restrictions before you close.
Insurance and flood costs to plan for
Flood risk is a real factor along the coast. Standard homeowners policies do not cover flood damage, so get an early read on flood zone and pricing for NFIP or private flood coverage. The city’s overview explains why this matters and how to evaluate it on the Delray Beach flood insurance page.
Second homes can carry higher homeowners premiums, and seasonal or vacant periods may require special endorsements. In Florida, insurers differentiate between primary and non‑primary residences. Citizens Property Insurance, the state’s insurer of last resort, highlights rate caps and differences that can affect non‑primary policies in its 2025 rate materials. Build these costs into your budget early.
Taxes: homestead and mortgage interest
Florida’s homestead exemption applies only to your permanent primary residence. You must own and occupy the property by January 1 and apply by March 1 of the tax year. Second homes do not receive homestead benefits. See the Palm Beach County Property Appraiser’s homestead guidance.
Federal tax rules allow mortgage interest deductions on a main home plus one second home, subject to IRS limits on acquisition debt and other conditions. Review the rules in IRS Publication 936 and confirm your specific situation with a tax professional.
A simple second‑home prep checklist
- Check your target loan amount against the $806,500 2025 conforming limit for one‑unit homes in Palm Beach County.
- Clarify your use: true second home for personal use, or short‑term rental that may be treated as an investment property.
- Ask lenders for written estimates of down payment, DTI, and reserve requirements for second‑home loans in your price range.
- Price insurance early: homeowners for non‑primary occupancy, flood coverage, and any vacancy or seasonal endorsements.
- Verify HOA or condo rental rules before you rely on any future rental income.
- If you plan to rent short term, prepare for DBPR licensing as needed and register for Palm Beach County’s TDT and business tax.
- Confirm you will not claim Florida homestead on a second home and note filing deadlines for your primary residence.
- If you hold mortgages on both a primary and a second home, consider how combined loan sizes interact with conforming limits and federal tax caps.
Ready to design a plan that fits your goals in Delray Beach? Reach out to Cindy Kief for discreet, white‑glove guidance and a local strategy that aligns financing, property search, and timing.
FAQs
What is the 2025 conforming loan limit for a Delray Beach second home?
- The 2025 baseline one‑unit limit is $806,500 in Palm Beach County, which can help some buyers qualify for conforming rather than jumbo financing.
How do lenders decide if my Delray Beach home is a second home or an investment?
- Lenders follow Fannie Mae rules: you must occupy it part of the year, control the property, and not run frequent transient rentals; heavy short‑term rental use often shifts it to an investment classification.
Can I use short‑term rental income to qualify for a second‑home mortgage?
- Generally no; for a second‑home loan, lenders typically do not count rental income toward qualification, and using the home primarily as a rental can change it to an investment loan.
What local taxes and licenses apply if I rent my Delray Beach second home short term?
- You may need state vacation‑rental licensing, plus Palm Beach County’s Tourist Development Tax registration and a Local Business Tax Receipt; always confirm city zoning and HOA rules.
Do Florida homestead benefits apply to my Delray Beach second home?
- No; homestead exemptions apply only to your permanent primary residence and require timely application with the county.
What insurance should I budget for on a Delray Beach second home?
- Plan for homeowners coverage that allows non‑primary use, flood insurance if required or prudent, and possible higher premiums or endorsements for seasonal or vacant periods.