STATEN ISLAND, N.Y. – Changes to federal mortgage fees, set to take place next week, may make it harder and more expensive for people with higher credit scores to purchase a house.
Credit scores have always played a big role in borrowing – a credit score is one of the factors that will determine how much a mortgage lender is willing to give you; a higher credit score will typically benefit you and allow you to take out a larger mortgage.
But beginning May 1, people with higher credit scores may wind up paying more in fees than people with lower credit scores.
In an effort to make buying homes more accessible and affordable, the Federal Housing Finance Agency in January updated its mortgage fee structure, or Loan Level Price Adjustments (LLPAs), for home loans backed by Freddie Mac and Fannie Mae.
“FHFA is taking another step to ensure that [Fannie Mae and Freddie Mac] advance their mission of facilitating equitable and sustainable access to homeownership,” the Federal Housing Finance Agency said.
Loans backed by Freddie Mac and Fannie Mae make up approximately 60% of all new mortgage loans, according to the Urban Institute.
For example, a person with a credit score of 659 looking to borrow 75% of a home’s value, would pay a fee equal to 1.5% of the loan balance with the new mortgage fee structure, USA Today explained. Prior to the change, the fee would have been 2.75%.
For a $300,000 loan, the difference between the old and new mortgage fee structure is $3,750.
A person with a credit score of 740 or higher, the fee on 75% of a $300,000 home could be as much as 0.375% compared to 0.25% before the new mortgage fee structure, the report said.
Another example given by Yahoo News, “a person with a 620 FICO score and a down payment of 5% gets a one and three-quarter fee discount on a 30-year mortgage. But a person with a FICO score of 740 or above, with 15%-20% down, will see an increase of 75% in fees from current levels.”
On average, people with low credit…
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