Thinking about a Telluride getaway that also helps cover costs, or a condo you plan to rent when you are not in town? In a resort market like San Miguel County, your loan type often hinges on how you intend to use the property. Getting the occupancy classification right can save you money and stress.
In this guide, you will learn how lenders distinguish second homes from investment properties, what that means for down payment, rates, and reserves, and how conforming loan limits interact with pricing in San Miguel County. You will also see how short term rentals affect your options. Let’s dive in.
Updated: November 2025
Second home vs. investment: what lenders mean
A second home is a vacation or seasonal residence you intend to use personally for part of the year. It is not your primary residence and it is not primarily income producing. Lenders typically expect clear personal use and limited or no ongoing rental activity.
An investment property is purchased mainly to generate rental income. It is underwritten as higher risk, so loans usually carry higher rates, higher down payment minimums, and more cash reserve requirements. If your plan centers on renting, lenders will likely treat it as an investment.
Primary residences receive the most favorable pricing, but most resort buyers here are choosing between second home and investor classifications. Your intended use and documentation will drive the decision.
How lenders verify occupancy use
Lenders look at your intent and the evidence you provide. For a second home, they often require your certification that you will occupy the property seasonally and that it is not offered for long term lease. Some lenders also consider how close the property is to your primary residence.
For an investment property, underwriters look for leases, historical rental income, or marketing that shows intent to rent. If you plan to use rental income to qualify, expect the lender to apply vacancy and expense factors and to require documentation like leases or Schedule E from your tax returns.
Down payment, rates, and reserves
Pricing generally follows a simple pattern: primary is lowest, second home is higher, and investment is highest. Within each category, higher loan‑to‑value, lower credit scores, fewer reserves, cash‑out, and jumbo size usually increase the rate or fees.
- Second home down payment: Typical minimums range from 10 percent to 20 percent depending on lender and profile. In resort markets, lender overlays often push toward the higher end.
- Investment down payment: Many lenders require 15 percent to 25 percent or more for a single‑unit. Multi‑unit properties often require at least 25 percent down.
- Reserves: Second homes often require 2 to 6 months of mortgage payments in liquid reserves. Investment properties commonly require 6 months or more, plus additional reserves if you own other properties.
Private mortgage insurance applies to primary and second homes above 80 percent loan‑to‑value. Investment loans do not use standard PMI, so higher leverage typically shows up in the rate or is limited by higher down payment thresholds.
Quick comparison at a glance
| Feature | Second Home | Investment Property |
|---|---|---|
| Typical minimum down | About 10% to 20% | About 15% to 25%+ |
| Rate level | Moderate premium vs. primary | Highest of the three |
| Reserve expectations | About 2 to 6 months | About 6+ months, often more |
| PMI availability above 80% LTV | Usually available | Not standard; priced via rate or LTV limits |
| Use of rental income to qualify | Limited and varies | Common, with vacancy factors |
Actual requirements vary by lender, credit profile, and property type. In San Miguel County, the resort profile often leads to more conservative overlays.
Short term rentals: how they affect your loan
Short term rentals can change the way your lender classifies the property. If the home is actively marketed for nightly rentals or set up as a consistent short term rental, many lenders will treat it as an investment property, even if you plan to stay there occasionally.
Some lenders allow limited seasonal rentals for second homes if you document compliance with local rules and HOA covenants. Policies vary widely. Before you count on rental income or choose a loan, confirm municipal rules, HOA permissions, and your lender’s position on short term rental activity.
Insurance matters too. A standard second‑home policy often excludes short term rental liability. You may need a landlord or short term rental policy, which typically carries higher premiums.
Local rules in San Miguel County
The Telluride area includes several jurisdictions, each with its own approach to short term rentals. Towns and HOAs may require permits, collect lodging taxes, set caps, or restrict nightly rentals in certain zones. Rules can change from year to year.
If rentals are part of your plan, verify the current municipal and HOA requirements before you choose a loan type or rely on projected income. Make sure your insurance coverage matches your intended use.
Conforming limits and jumbo in a resort market
Conforming loans adhere to county limits published each year. A mortgage at or below the San Miguel County conforming limit for the specific unit count can be delivered to Fannie Mae or Freddie Mac, which often means better pricing and more flexible underwriting than jumbo.
Because San Miguel County includes Telluride, conforming limits here have historically been higher than the national baseline. That helps more buyers stay within the conforming pricing band. If your loan amount goes even slightly above the county limit, you move into jumbo territory, which usually means higher rates, stricter reserves, and more conservative underwriting.
Two practical steps help you avoid surprises. First, check the current FHFA conforming loan limit for San Miguel County and your property type. Second, run scenarios to see how small changes in down payment could keep your loan at or below the conforming threshold.
Choosing the right path for your goals
Start with your true use case. If your priority is personal time in Telluride, a second‑home loan may fit, as long as you keep rental activity limited and documented. If your plan centers on consistent rental income or active short term rental marketing, expect investment underwriting and plan for the higher down payment and reserves.
Next, map your price range against loan size and conforming limits. If a modest increase in down payment keeps your loan conforming, the long‑term savings may outweigh the upfront cash.
Finally, assemble the right team. Lender overlays and local rules shift, especially around short term rentals. Work with a local broker who can coordinate lender expectations, HOA covenants, and municipal requirements so your financing and ownership plan align.
A simple pre‑offer checklist
- Confirm your intended use: personal use, occasional rental, or income‑focused.
- Ask your lender how that use will be classified in San Miguel County.
- Verify current FHFA conforming limits for the county and unit count.
- Request your lender’s overlays for second homes, investments, and short term rentals.
- Review HOA covenants and town rules for rental permits, caps, and taxes.
- Price out insurance for your intended use, including STR coverage if needed.
- If you will use rental income to qualify, gather leases or recent Schedule E and ask how vacancy factors apply.
- Compare total cost of conforming vs. jumbo scenarios at your target price.
What to do next
If you are weighing a Telluride second home against an income‑oriented purchase, a short strategy session can clarify your best path. With three decades in San Miguel County and deep experience across second‑home and investor transactions, Jim can help you align use, financing, and neighborhood rules before you write an offer.
Request a confidential consultation with Jim Lucarelli to get tailored guidance for your goals in Telluride and Mountain Village.
FAQs
Can I finance a Telluride vacation home with a conforming loan?
- It depends on your loan amount relative to the current San Miguel County conforming limit and unit count; at or below the limit may qualify as conforming, while anything above is usually jumbo.
How much down do I need for a second home versus an investment?
- Second homes often require about 10 to 20 percent down, and investment properties often require about 15 to 25 percent or more, with resort‑market overlays pushing higher.
Will short term rentals force an investment classification?
- Often yes; active nightly rental marketing or frequent STR use commonly leads lenders to treat the property as an investment even if you plan some personal use.
How do jumbo loans differ in a resort area like Telluride?
- Jumbo loans usually have higher rates, stricter reserve and DTI requirements, and more conservative appraisals, which can add time and documentation to your process.
Can I use rental income to qualify for a second‑home loan?
- Policies vary; many lenders limit rental‑income use for second homes, while investment loans commonly allow it with vacancy and expense factors and proper documentation.
Jim Lucarelli is a seasoned Colorado real estate agent with over 34 years of experience, primarily in the Telluride market. Formerly owner of Real Estate Affiliates of Telluride, he joined Compass in 2020, leveraging their advanced resources. A four-time past president of the Telluride Association of REALTORS® and three-time REALTOR® of the Year, Jim has deep market knowledge, especially in ranch properties. He's also experienced in construction management and actively involved in the Telluride community, serving on several boards.
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