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Fannie/Freddie Second Home Pricing Jumps Up in 2022

Thursday, February 10, 2022   /   by Joe Johnson

Fannie/Freddie Second Home Pricing Jumps Up in 2022

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Due to industry changes, your clients looking to buy a second home this year need to prepare to pay more.

To continue its mission of providing affordable primary residence purchases, the Federal Housing Finance Agency (FHFA) announced Jan. 6 that the agency is raising loan-level price adjustments (LLPAs) for second home transactions beginning with loans delivered to Fannie Mae and Freddie Mac on or after April 1, 2022. These types of loans do not fall under that FHFA mission, so by increasing the cost they are in essence trying to shift these originations to the private sector.

This means your second home financed by Fannie Mae and Freddie Mac will cost more via a higher interest rate, up-front discount points to buy the rate down, or both. Since it takes time to originate, close, fund and sell a loan to Fannie Mae, unfortunately, these price changes are already in effect.

LLPAs—upfront charges for certain risk factors such as high loan-to-value (LTV) ratio, low credit score, and multiple units—get passed on to homebuyers at loan origination in the form of points or through a higher rate.

For second homes, pricing adjustments will increase from their current 0% to 0.25% of the loan amount to between 1.125% and a whopping 3.875%, depending on LTV. If we look at a $400,000 purchase amount, even at a 60% LTV ratio, the increases will result in a discount point charge of $4,500 or a rate increase of 0.25% to 0.50% to offset the upfront cost.

As a result, financing second homes will basically cost as much as investment properties going forward. However, it’s possible to find creative solutions, such as a 60% first mortgage, a 20% second mortgage, and 20% down to avoid the highest fees.

Though we can’t control Fannie and Freddie, you can control your credit and therefore lessen some upfront costs. 720 or higher is best for second homes, investment properties, and the like.

Want help understanding what this all mean for you? The Reiner Realty Team can help! Call us today at 540-793-4095 or click here for more info.

        Reiner Realty Group, Realtors with Lichtenstein Rowan
        Rene Reiner
        3621 Manassas Drive
        Roanoke, VA 24018
        540-793-4095
        Joel Balsley
        NMLS#210455
        Licensed in VA
        Office #: 540-278-1430
        Mobile #: 540-597-8877
        joelbalsley@atlanticbay.com


        Featured real estate company is not a mortgage lender and so you should contact Atlantic Bay Mortgage Group, L.L.C. directly to learn about its products and your eligibility for such products. The featured lender has an affiliated business relationship with the featured real estate agent. You are under no obligation to use the featured lender for financing. All loans subject to income verification, credit approval and property appraisal. Not a commitment to lend. Atlantic Bay Mortgage Group, L.L.C. NMLS #72043 (nmlsconsumeraccess.org) is an Equal Opportunity Lender. Located at 600 Lynnhaven Parkway Suite 203 Virginia Beach, VA 23452.
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