If you're in the market to buy a vacation home in Florida (or, for that matter, anywhere in the U.S.A.), then you might be reading some stories online about how demand for second homes has slowed down significantly since this time last year. The short story here, is that it's not all chatter. The changes are for real. But, like most of the Florida housing market weather we've been experiencing recently, it is the result of multiple factors, not just one. And, the weather is not the same for everyone. For some, the current state of the housing market might mean it's too stormy out and not a good time for you to buy a second home. For others, it could mean sunny, clear skies and it's the perfect time.
If you and I have worked together in the past, you've heard me say that in the mortgage business, "you have to be like a palm tree in a hurricane-- strong, yet flexible." And, the same could be arguably true for homebuyers in the market currently looking for a second home. Without going into too much details, here's a brief explanation of why:
So, we all remember how around March of 2020, everything went on lockdown due to COVID-19, right? (How could we forget!?) This, among other contributing economic factors, resulted in mortgage interest rates (and rates for all types of loans, really) to go down. This resulted in an incredible demand for mortgages across the board, including second homes; so much so, in fact, that in March of 2021 (just one year after COVID-19 hit hard) demand for second homes was a whopping 89% higher than in pre-pandemic 2019.
Fast-foward to December of 2021, and we started to signs of changes in the winds. Rates started to creep upwards for all homebuyers, including first-time homeubyers for primary homes. So, we weren't very surprised when, on January 5, 2022, the Federal Housing Finance Agency (FHFA) made an announcement that would drastically effect the interest rate for all high-balance loans and second home mortgages. Basically, this announcement made it clear that they would increase the pricing on second home purchases to try to keep interest rates low and affordable for first-time homebuyers. The changes announced went into effect in April 2022, making upfront fees for second home loans "increase between 1.125 percent and 3.875 percent, tiered by loan-to-value ratio."
Consequently, May 2022 saw a drop-off in the demand for second homes that had news headlines buzzing. And, here we are!
What does this mean for you, as a potential homebuyer in the market to buy a Florida vacation home? Well, like I said before, it depends. For some buyers, it's still the perfect time, and we can mitigate these increases to upfront fees by keeping the loan-to-value ratio relatively low (in other words, if you have a down payment of 20% or more, this will help).
But, more importantly, you'll need a trusted Florida mortgage consultant who can competition shop for you to find the lowest rate possible across many lenders. This is where I can help you, even if the weather you find yourself in for your unique mortgage qualifying factors is not as sunny as you'd like . . . despite the forecast, it is possible to obtain ideal mortgage financing for your Florida vacation home.
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