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It's About to Get More Expensive To Buy Vacation Homes

The FHFA is raising upfront loan fees for certain mortgages beginning April 1. See which loans and borrowers will be affected.

January 6, 2022
January 6, 2022
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Homebuyers purchasing second homes and certain high-value homes will be paying higher mortgages fees beginning very soon.

The Federal Housing Finance Administration (FHFA), overseer of Fannie Mae and Freddie Mac, announced today that it is increasing upfront fees on certain larger loans and second-home loans regulated by these agencies.

Upfront fees for high-balance loans will increase 0.25 to 0.75 percentage points. The fee amount depends on the down payment percentage or amount of equity in the home for refinances.

Buyers typically absorb fees from FHFA via a higher interest rate, though some choose to pay them in cash upfront to keep their rate down. Either way, the loans are about to get a bit more expensive.

High-balance loans – referred to as super conforming loans by Freddie Mac – are mortgages in select high-cost areas where the conforming loan limits are above the 2022 baseline of $647,200 for single-family homes.

For example, the conforming loan limit for a single-family home in Seattle is $891,250. Other high-cost areas include all of Alaska and Hawaii, and parts of California, Colorado, and New York.

The new fees will affect all high-cost areas, but not all borrowers will be affected.

The new high-balance fees do not apply to loans for first-time homebuyers or borrowers making at or below the area median income. Nor do they apply to Freddie and Fannie’s affordable housing loan programs such as HomeReady, Home Possible, HFA Preferred, and HFA Advantage.

The FHFA is also increasing upfront fees to loans for second homes, which will affect vacation property buyers. These fees will increase between 1.125 percent and 4.125 points based on the loan-to-value ratio.

The fees themselves apply to mortgage lenders selling loans to Freddie and Fannie on the secondary market. However, with margins expected to be thin in 2022, lenders will be implementing the fees into high-balance and second-home loans in coming days and weeks, if they haven't already.

Homebuyers who are looking at vacation homes or in primary homes in high-cost areas may want to find a home soon to avoid the higher costs.

Why the fee increases?

The upfront fee increases signal the beginning of a larger reshaping of Freddie and Fannie’s pricing structure under Acting Director Sandra Thompson.

“These targeted pricing changes will allow the Enterprises to better achieve their mission of facilitating equitable and sustainable access to homeownership, while improving their regulatory capital position over time," Thompson said in a press release. "Today’s action represents another step FHFA is taking to strengthen the Enterprises' safety and soundness and to ensure access to credit for first-time home buyers and low- and moderate-income borrowers."

Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA, and were not approved by a government agency.

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