**It is important to note that we are not mortgage professionals and the article written below is our opinion and understanding of the changes taking place 04/01/2021. Please contact Debbie Hill with Mortgage Investors Group to better understand how this affects you directly at 865-604-1888

What Has Changed With Vacation Home/Second Home Loans?

A large percentage of consumers looking to purchase log cabins in The Smoky Mountains are doing so with the idea in mind that they are able to purchase and obtain these cabins as a vacation home/second home and finance them accordingly. This is the most common type of loan that we see in this area. It has been very attractive to Buyers simply due to the fact that many of the terms and fees are very similar to conventional financing that you would obtain for your permanent residence and you could do so with only 10% down. There also wasn't any real limitation by Fannie Mae or Freddie Mac on how many of these loans they would buy from the nations mortgage shops.

Well, what has changed? Quite a bit, honestly. The Treasury has amended the guidelines that Fannie, and soon to be Freddie, will have to adopt and implement as of April 1st, 2021. The changes put restrictions on them as to how many vacation home/second home loans they can carry at any given time. In a nutshell, this means that the next year or 52 weeks of vacation home loans sold to Fan & Fred from each lender can be no more than 7% of the loan volume that each lender recorded in the last 52 weeks. This will create a great deal of hesitation amongst the lending community to underwrite these loans. There are still quite a few questions as to what will happen if a lending institution exceeds the 7% rule, but the repercussions could be severe. It could result in substantial fees (yet to be disclosed by Fan/Fred), or a denial on purchasing the loan. This will result in lenders increasing their fees, min down payments, and/or elimination of offering the second home loan all together. **One thing worth noting is that there are still several lenders that do service their own loans and keep them in house. By doing so they are not necessarily bound by the same restrictions and will still offer attractive loan options for the consumer looking at a second home/vacation home. 

There are still alot of questions and unknowns and I'm sure more information will continue to come out over the coming weeks. For now, assume that a 10% down product will no longer be the norm and most options will require 20%. Stay tuned for more information as it comes available.