It looks like Litchfield second homes may have just become more affordable for many who have considered investing in one, but who couldn’t make the numbers work. The reason is technical, yet far from being one of those ‘inside baseball’ details. Its practical impact can be significant.
The news was published with little fanfare at the start of this month, buried as it was in Fannie Mae’s revised Selling Guide. That’s the document that mortgage lenders refer to when the semi-governmental agency’s backing is being sought for a new home loan. In Section B2-1-01, which outlines the requirements for Fannie-sponsored home loans for various occupancy types, there appears a lone footnote at the bottom of the page dealing with “Second Home Properties.” The footnote reads, in part:
“If the lender identifies rental income from the property, the loan is eligible for delivery as a second home…”
Previously, both Fannie Mae’s and Freddy Mac’s qualifying language had been widely interpreted as forbidding second homes’ use as rentals of any kind. “Borrower shall occupy, and shall only use, the Property as Borrower’s second home” seemed to many mortgage underwriters to restrict renting—and when that phraseology was included in the loan’s fine print, borrowers frequently assumed the same. Since supplementary rental income can be a decisive element in a buyer’s decision-making, the dampening effect was real—especially as web services like Airbandb make casual renting more common.
An important part of my job is keeping abreast of the many changes that make Litchfield’s real estate market a moving target. Whatever your plans, if Litchfield real estate is part of the picture, feel free to give me a call!
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