If you’re considering a second home or a property that’s priced above the conforming loan limits for your area, the Federal Housing Finance Agency’s (FHFA) new announcement regarding fee hikes may affect you. The FHFA is rolling out new upfront fees for these types of loans that are backed by government-sponsored enterprises Fannie Mae and Freddie Mac. Interested in learning more? Here’s what you need to know:
What to expect from the fee hikes
Beginning April 1, 2022, upfront fees for loans on second homes will increase 1.125% to 3.875%. The fee increase for high-balance loans will range from 0.25% to 0.75% based upon loan-to-value ratio. This means that if you’re planning to purchase a home that you’ll live in part time (like a vacation home) or a property above the conforming loan limit of $647,200 for most counties, you’re probably looking at additional costs coming your way.
According to the agency, these changes will be implemented to minimize market and pipeline disruption. If you’ve been shopping for a home, there’s no doubt you’ve noticed that prices are on the rise in every corner of the country. In response to inflation of home prices, the FHFA is focused on maintaining affordability of homes for more households. In essence, these fee hikes will bolster the cash reserves of Fannie and Freddie. As a result, more low-to-medium income borrowers will be able to secure credit for a home.
Although many high-balance and second-home loans will be affected by these fees, there are several programs (including HomeReady, HomePossible, HFA Preferred, and HFA Advantage) that won’t be impacted. First-time buyers in areas with high cost of living whose income is below 100% of the median income for the area will also be exempt from the fees.
Since the fee increases won’t go into effect until April, now is the time to take action if you’re interested in pursuing financing for a second home or a home that’s above the conforming loan limits for your area. Although the FHFA’s announcement has come months in advance of April 1, the process from application to closing often takes over a month. For peace of mind, it’s ideal to apply as early as possible if avoiding fees is your goal.
By Michaela Phillips. Michaela is the Senior Lender for Synergy One Lending in Boulder. She enjoys teaching her clients the pros and cons of being a Real Estate Investor. Contact Michaela at 303.579.5517, e-mail
[email protected] or visit michaelaphillips.com. NMLS: 3128