Loan Changes Effective April 1 Could Have Big Impact
Fannie Mae recently announced that it is tightening the underwriting criteria for second homes and investment properties. The agency purchases these loans from lenders, and will now impose new restrictions.
If you’ve been thinking about buying a second home or investment property, this big change means it could be harder to get a loan now or it could be more expensive in the form of fees, larger down payment requirements, or higher interest rates.
This also means that a larger portion of buyers may start to be removed from the market, impacting demand for homes. This could be positive or negative depending on who you are: For buyers who have been competing for every house that comes on the market, this may be a welcome relief. Less people to compete with on homes listed.
For sellers, less buyers means less demand, and this could start to cool the market, especially in towns where there are many second homes or rental properties.
Breakdown of New Rule Fannie Mae will be limiting its acquisition to 7% of single-family mortgage loans for such homes and properties. As the investor and second home share of acquisitions is already above 7% and has been since 2013, this new rule will have an impact.
- Changes were made to its eligibility policies for these loans, which lenders must follow.
- The new rule takes affect for loans submitted to Fannie Mae on or after April 1, 2021.
While there was no announcement of a price adjustment (or interest rate increase) from Fannie Mae, we may see an increase in rates to stem the volume of this loan product. This is to be determined…
Reach Out for Help
If you’re a buyer interested in purchasing a second home or an investment property, be in touch with me soon so we can discuss the options and what financing is available.
Bottom line, demand for second homes and investment properties will be greatly impacted by Fannie’s policy. Expect higher costs and fewer financing options available on those getaway homes or rental properties!
I'm Jordan and I love helping first time home buyers make their first home more affordable and stress-free! It all starts with your personal budget and how much you can comfortably afford. Let me know how I can help you make your real estate dreams come true.
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