Mortgage Rates are Soaring on Second Homes

FHFA, the overseer of Fannie and Freddie announced early last week a HUGE change in mortgage pricing for borrowers needing a high balance loan amount (over $647,200) in metro Denver and even bigger changes for buyers of second homes. Why? “These targeted pricing changes will allow the enterprises (Fannie & Freddie) to better achieve their mission of facilitating equitable and sustainable access to homeownership.”  

These pricing changes go into effect on loans delivered to Fannie and Freddie on April 1st or later. We expect most of our investors will implement these changes immediately. Thus, we will be updating our pricing on January 10th with these price changes. But, if I lock a borrower’s loan with Fannie or Freddie directly and our loan closes by March 15th our secondary department will adjust their price back down before closing as we can deliver loans to Fannie and Freddie in <15 days. 

⦁ For high balance loans the price paid by borrowers will increase by 50 bps to 100 bps, which means a rate increase of 1/8% or ¼% all depending on loan to values.

 ⦁ On second homes the fees are OUTRAGEOUS!!! They start at a price increase of 112.5 bps with 40% down, 212.5 bps with 30% down, 337.5 bps with 25% down and 412.5 bps with 10% to 20% down. 

⦁ This means the rates on second homes will increase by ¼% to over 1% versus a primary residence loan. 

⦁ Rates on second homes will be higher than they are on rental properties. It will be better for a borrower to buy their second home as a rental property. 

⦁ I bet Fannie and Freddie will soon realize this and raise their costs on rental property loans too all for more equitable housing. 

We need NAR to act now and petition FHFA and Congress to stop this NEW TAX on these borrowers as NAR has the most powerful voice in D.C.