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Owner-occupied second home: Typically 10 percent down is required, but most people put 20 percent down to avoid mortgage insurance, said Kris Wilson, senior loan officer for Fairway Independent Mortgage, Bloomington.

Mortgage qualifying guidelines are the same as for a primary residence, but a lender will consider primary residence expenses in the ratio.

Investment property: Stricter guidelines and more variables are involved in qualifying for a mortgage. Typically borrowers will pay a slightly higher interest rate and a minimum of 20 percent down.


Investing in vacation property and renting it out: You can deduct property taxes, mortgage interest and other rental expenses. You can also deduct the cost of the building over 27.5 years. See your tax accountant about passive loss rules that may apply.

Capital gains home-sale tax break: When you sell your primary residence you can make up to $250,000 in profit for a single owner ($500,000 if married) and not pay capital gains taxes. There's no limit on the number of times you can make tax-free profits on a home sale.

If you own rental property, you can move in and make it your primary residence, but you must live in the home for two of the five years before you sell to receive the exemption.


Who they are

Median age: 46 Median household income: $99,100

Why they buy

No. 1 reason: Family retreat No. 2 reason: Future primary residence

Where they buy

No. 1 location: The South No. 2 location: The West

What we know

Baby boomers own 57 percent of all Second-home sales fell along with the overall housing market in 2007,

vacation/seasonal homes. but still accounted for nearly a third of all homes bought nationwide.

Source: National Association of Realtors


1. Panama City Beach, Fla.

Why buy now: It will be easier to fly to the sugar sand beaches and tropical climate when a new international airport opens in the next few years -- boosting tourism and property values.

2. Pocono Mountains, Pennsylvania

Why buy now: The four-season destination with lake and mountainside homes is experiencing a resurgence. Home prices didn't climb as high during the boom, so they've held their value.

3. The Crystal Coast, North Carolina

Why buy now: With its unspoiled beaches, national parks and wildlife preserves, this area has retained its charm and beauty. Property values fell 18 percent this year, but because the popular vacation spot has seen little negative impact from speculative real estate investments, it should rebound quickly.

4. Lake Tahoe, California

Why buy now: Condos, cottages, and single-family homes are on a mountainous shoreline with skiing in the winter and boating in the summer. California home prices have plummeted 26 percent since last year, but the hot spot should spring back when the economy stabilizes.

5. Great Smoky Mountains, Tennessee

Why buy now: The Great Smoky Mountains National Park offers a year-round retreat for everything from summer camping to winter skiing. Although home values have taken a hit, tourism spending remains high.

Source: Smart Money Magazine