A rule change related to how America’s largest loan guarantors calculate up-front mortgage rates will take effect May 1.
Rates on new mortgages will be relatively cheaper for home loans backed by Fannie Mae and Freddie Mac. For borrowers with higher credit scores, costs typically increase.
He updated fee structure means costs will increase by up to 0.75% for borrowers with higher credit scores. And for people with lower credit scores, fees will drop by as much as 2%.
For example, a buyer with a credit score of 650 who put a 25% down payment on a $400,000 home would now pay 1.5% in loan fees, or $4,500. That compares to 2.75%, or $8,250, under the old fee structure.
Meanwhile, a borrower with a credit score of 750 who puts 25% down on a $400,000 home would now pay 0.375% in fees, or $1,125, compared to 0.250%, or $750, under the old fee regime.
Why is this happening? In January, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, Announced he wanted to make home buying more affordable for people who are «constrained by wealth or income» and ensure a «level playing field» for sellers.
The agency updated its mortgage rate structure to accomplish that.
«FHFA is taking another step to ensure that [Fannie Mae and Freddie Mac] advance its mission to facilitate equitable and sustainable access to homeownership,” he said in the statement.
Not everyone is happy with the newly adjusted rates. Some conservative commentators have criticized them as subsidizing higher-income borrowers to lower-income ones.
Matt Graham, co-founder of the mortgage news website MBSLive.net, said the FHFA has long been involved in that type of cross-subsidy program, especially since the Great Financial Crisis from 2007-08.
«It goes back to their affordable housing goal,» Graham said of the agency’s new fee structure. «If you only charged full market absolute rates, you would only have investment properties in a nation full of renters.»
Homeownership has only gotten further out of reach for many people who have been shut out by rising interest rates and the low supply of available homes on the market.