Increases Coming for 2nd Home Owners
If you’re in the market for a 2nd home, the FHFA just made an announcement you’ll want to pay attention to.
On January 5th, the Federal Housing Finance Agency announced that beginning April 1st, the upfront fees for conventional home loans on second properties will increase between 1.125 percent and 3.875 percent, tiered by loan-to-value ratio. Similar changes will also be coming to conforming high-balance loans, with fees increasing 0.25 percent to 0.75 percent. We know that fee increases like these always hit the buyers.
Second homes are any home that a person occupies for part of the year, in addition to their primary home. This typically includes a vacation home, such as a lake house in the mountains or by the beach. Snowbirds looking for a warmer winter are the most common buyers to have a second home. Second homes different from investment properties.
Investment properties are those that a buyer intends to purchase for the purpose of earning income from. In investment properties, the buyer does not intend to live at the residence. This often includes rental properties, commercial properties, or properties bought with the intention to “flip”.
Prior to the announcement, second home loans were treated differently than investment properties. Investment properties typically have higher interest rates and require a larger downpayment.
High-balance loans, also called super-conforming loans, will also be affected. Super-conforming loans are those that are larger than the national baseline conforming loan limit, but falls within the limits for a high-cost county. The current national baseline limit for 2022 is set at $647,200, and $970,800 in pricier areas.
Here’s the bottom line: If this affects you, acting sooner rather than later could save you a lot of money.
If you’re in the market for finally buying that vacation home, or you’re a snowbird looking for a warmer winter, we recommend submitting your application now. By doing so, this could increase your chances of closing on a 2nd home before the increase in fees kicks in. Give us a call to get the process rolling TODAY.
