New mortgage fees go into effect on May 1st, 20 for all Fannie Mae and Freddie Mac loans and will impact each borrower differently. There has been a lot of press about how people with higher credit scores are going to be paying more and people with lower credit scores are going to be paying less.
This causes a lot of us to shake our heads and do a double-take. What!? That doesn’t make sense!
Well like many things you read today that is true but it needs to be put into context. When you hear it you think the people with lower credit scores are going to be paying less than the people with higher credit scores. That is not the case, but people with higher credit scores are going to be paying MORE than THEY were before the new fees went into effect and people with lower credit scores are going to be paying LESS than THEY were before before the new fee went into effect.
This is due to a new program to help incentivize new buyers into the market who thought they couldn’t get a mortgage. The best example I have read of how this works was in this WGN article.
“Someone with a credit score of 750 purchasing a $400,000 house with 25% down, those fees will go up to 0.375% instead of .25%. Someone with a credit score of 650, putting down 25% on a $400,000 house, the new fee will be 1.5% which is a lot lower than the 2.75%,”
So you aren’t paying more than someone with a lower credit score but there isn’t as much of a benefit/savings if you have a higher credit score as there use to be. It should be noted that this is not lowering lending standards it is just making it a little less expensive for someone with a credit score that is good enough to qualify for a mortgage but may have had a few blemishes in the past that they are working to overcome. They still have to meet the higher lending standards that have been imposed since the last housing crisis.