Earlier this year, the Federal Housing Finance Agency (FHFA) introduced new guidelines that, in effect, reduced opportunities for people to finance second homes or investment properties through government entities Fannie Mae and Freddie Mac. However, the FHFA and Treasury have recently announced a reversal of these restrictions, opening up more possibilities for those hoping to snag a second home or investment property. Interested in learning more? Here’s what you need to know:
About the changes
If you’ve been on the search for housing, you’ve probably noticed that the market is incredibly competitive for both renters and buyers. As a result, the restrictions put in place earlier this year have been lifted in an effort to give a boost to the dwindling housing supply across the country.
The previous guidelines capped the entities’ lending for investment properties or second homes at just seven percent of their portfolio (more than a 50 percent reduction). Since Fannie Mae and Freddie Mac-backed mortgages often offer lower interest rates, many individuals and investors were unable or unwilling to pursue financing for more properties. However, as the demand for housing continues to grow, the FHFA reversed the policies in an attempt to promote housing stability now and in the future.
What this means for investors or those seeking a second home
With Fannie and Freddie now able to back more second home and investment loans, now is the time to move forward if you’ve been considering this possibility. Securing a conventional mortgage is what many buyers are looking for, as this type of loan is known and loved for its competitive interest rates and affordable down payments. However, it’s critical to keep in mind that this reversal may be temporary. The FHFA is still reviewing the impact of this decision, so if you’re ready to buy, time may be of the essence.
There are many perks to adding a second home or investment property to your portfolio.
With home prices still on the rise, purchasing another home while interest rates are still low may be a decision that will benefit your financial future for years to come.
By Michaela Phillips. Michaela is the Senior Lender for Synergy One Lending. 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: 312874.