How New Mortgage Supplies Can Affect Some Loans

Fannie Mae and Freddie Mac are imposing new mortgage rates on expensive housing and second homes. For the range of borrowers targeted by the change, the new charges could add thousands of dollars to the original cost.

Higher pricing affects homeowners with mortgages over $ 647,200 and homeowners with mortgages of any size.

The Federal Housing Finance Agency, which oversees Fannie and Freddie, announced the additional fees last month. The new charges take effect on April 1st. However, because mortgages may take a few months to close, borrowers have begun to notice the new charges.

“We’re already seeing it on the price list,” said Kevin Quinn, senior vice president at First Internet Bank in Fishers, Indiana.

The new price adjustment ranges from 0.5 percent to 1 percent of the amount of high-end loans in high-cost housing markets. For second home mortgages, down payment will range from 1.125 percent to 4.125 percent, depending on the size of the down payment.

“In addition to the recent rise in mortgage rates, the inclusion of higher commissions for many buyers in high-cost markets or those buying a second home could affect the borrower’s ability or willingness to make the transaction,” said Greg McBride. financial director of Bankrate. analyst.

“Taxation of home buyers”

The National Association of Housing Builders has opposed the new charges, saying it “strongly opposes” imposing additional costs on homeowners.

“With the nation in the throes of affordable housing and many more workers opting for telecommuting, this is just the right time for federal regulators to raise property and second home fees,” said Chuck Fowke, president of commercial group of manufacturers. . “If [the Federal Housing Finance Agency] is really interested in promoting affordable housing, the agency would not tax home buyers to fill the fundraisers for Fannie Mae and Freddie Mac. “

The Federal Housing Finance Agency says it is considering affordability. For example, first-time buyers with incomes below the median income level in their area will not have to pay the fee.

How the new tax will affect buyers in high-cost housing markets

For home purchases in most parts of the United States, Fannie and Freddie limit the amount you can borrow – to $ 647,200 in 2022 (adjusted annually). Get a mortgage loan for more than that, and it is classified as a jumbo loan. Jumbo are considered “non-compliant loans”, which means that they do not comply with agency standards. So in most cases, Fannie and Freddie will not support or buy them, which makes these loans more risky for lenders and traditionally more expensive for borrowers – although, in a reversal, Loan interest rates were actually lower than compliant loans in early 2022.

However, Fannie and Freddie also realize this not all real estate markets are created equal: HOomes cost more in San Francisco than in St. Louis. This allows borrowers in more expensive areas to take out larger loans to varying degrees.

For example, in parts of coastal California, the New York subway area, and throughout Alaska and Hawaii, the loan limit this year is $ 970,800. In Boulder County, Colorado, the limit for 2022 compliant loans are $ 747,500. In Monroe County, Florida, where the Keys are located, the limit is $ 710,700. In the Nashville subway area, it’s $ 694,600.

These mortgages fall between $ 647,200 and the highest local limits – called supercompany or high balance loans – that subject to the new end. The charge will range from 0.5 percent to 1 percent, depending on the loan-to-value ratio. Thus, a $ 900,000 loan with the least favorable loan-to-value ratio will be subject to a 1 percent commission or a $ 9,000 down payment.

How the new end affects second home mortgages

For second home loans, the new down payment will range between 1,125 percent and 4,125 percent, depending on the loan-to-value ratio.

For example, a borrower with a $ 300,000 mortgage and a loan interest rate of 65 percent will pay an additional commission of 1,625 percent, or $ 4,875.

Borrowers who do not pay at least 20 percent will pay a hefty commission of 4.125 percent of the loan amount, according to Fannie Mae. So borrowing $ 400,000 on a $ 450,000 vacation home would mean paying a hefty $ 16,500.

Previously, second home buyers did not pay extra for loans purchased by Fannie and Freddie.

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