A recent change is affecting mortgages on investment properties and second homes. Fannie Mae and Freddie Mac, companies chartered by Congress to purchase mortgages from financial institutions and repackage them for investors, has made it more difficult and more expensive for lenders to offer mortgages on these types of properties.

Fannie Mae and Freddie Mac basically have cut back on the number of loans they will accept for investment properties and second homes. Many lenders have adjusted to these limits by pricing these loans so high that borrowers are finding that the return on investment doesn’t make sense.  For example, lenders are adding a premium to the pricing, which can now cost a borrower 4 to 5 discount points to get a reasonable mortgage loan rate. Some loans like cash-out refinancing on investment properties are virtually impossible in Colorado since they become high-cost mortgages and these are not allowed.

Once the cost of the mortgage goes too high, the state says no way to that financing. Indigo Mortgage Colorado still has several lenders who have not raised the premium on pricing and we have been able to get a few second homes and investment properties financed at a reasonable rate. If you’re looking at purchasing an investment property or second home, this is definitely the time to shop that mortgage around, as you might see huge differences in pricing.