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Borrowing for second homes to become more expensive

Demand for second homes has gone through the roof in the last couple of years, as newly remote workers seek more space and better scenery. This interest started to surge in mid-2020 as affluent Americans dispatched to vacation destinations, taking advantage of low mortgage rates and remote work.

Soon, they’ll have to pay a little more for those homes. Last week, the Federal Housing Finance Agency announced it’s increasing the upfront fees for second-home loans sold to Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac, the government sponsored enterprises that guarantee most US mortgages, announced substantial increases in the fees (Loan Level Pricing Adjustments) they charge on second home and “high balance” mortgages. The new costs are effective for loans securitized on/after April 1, meaning borrowers will see them added within weeks (even for loans closing well before April 1).

The bottom line? A high balance loan borrower might/might not notice slightly higher closing costs, but 2nd home buyers will almost certainly notice them. Want to avoid the new costs? The time to act is now, the increases will be impacting loan pricing in weeks, not just starting April 1. 

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