Fannie Mae and Freddie Mac are making some major changes when it comes to purchasing a 2nd home or an investment property.
Freddie Mac is lowering their maximum loan to value for 2-4 unit properties under the Home Possible program. Effective with all loans delivered to Freddie Mac on or after April 1, 2021, the maximum loan to value will be 85%. This means these loans need to close by March 19th. Anyone using this program has to owner occupy the property.
Fannie Mae has some more major changes that affect second homes and investment properties. All second homes and investment properties must be underwritten with DU approvals (no manual underwriting allowed any more). Borrowers residing in a foreign country will no longer be eligible for a 2nd home or an investment property. There is an exception for a high LTV refinance loan as long as it meets certain criteria.
The Federal Housing Finance Agency has some new rules and it is placing a tighter cap on the number of second home and investment properties that Fannie and Freddie can purchase. Fannie Mae has come out with higher fees for those purchasing a second home or investment property. Mortgage News Daily is reporting that Penny Mac is adding a charge equal to 2.25% of the loan amount on all non-primary residence loan applications. If you are putting less than 25% down, the fee is even higher. Some lenders may increase the rates they charge to cover the additional fees.
Can you avoid these fees? Possibly. At this time Freddie Mac has not announced the same changes but it could come soon. So Freddie Mac may be a way to buy now. Otherwise using a jumbo program may also work. There may be more options as other investors think about offering more programs to purchase investment properties.
In the meantime, if you want to purchase a second home or an investment property, the best thing to do is make sure your credit is in great shape, your financials are good and you have a sizeable down payment.
Leslie Vanderwerf, NMLS ID#335509, Cross Country Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website