Buyers with good credit are now paying more for a new house than those with less than stellar credit.
The Federal Housing Finance Agency implemented new mortgage fees that went into effect on May 1. The changes to Loan-Level Price Adjustments will impact the amount homebuyers pay in closing costs and in their monthly mortgage.
“A lot of people just don’t understand the changes that have occurred,” said Jeffrey Mancovsky with Mortgage Equity Partners in South Easton. “That’s some of the misinformation that I’m hearing, ‘Oh, the people with bad credit are getting a better deal than the people with good credit. That’s not true.”
According to HousingWire, the buyers who are taking the biggest hit are the ones with a 720-759 FICO score with a 15-20 percent down payment. . They’ll face an increase of 0.75 percent, which would mean $3,000 more on a $400,000 loan.
However, if your FICO is 659 and you’re borrowing 75 percent of the home’s value, you’ll now pay a 1.5 percent fee. Before these changes, you would have paid a 2.75 percent fee, which would mean $3,750 more in closing costs on a $300,000 loan, HousingWire said.
Mancovsky said these changes really help out first-time home buyers because it benefits people who put down only three percent.
“The [federal] mandate is for more affordable housing and to create affordable housing. How do you do that? By lending to the people that are struggling to get housing,” Mancovsky said. “I think it’s helping the people that need help.”
FHFA Director Sandra L. Thompson issued a statement last Tuesday following weeks of criticism from the housing industry.
“Higher-credit-score borrowers are not being charged more so that lower-credit-score borrowers can pay less,” she said. “The updated fees, as was true of the prior fees, generally increase as credit scores decrease for any given level of down payment,” Thompson said.
North Attleboro mortgage lender Virna Brown questions the timing of the changes.
“We’re in a market right now where the inventory is so low, everybody is competing,” Brown said. “To increase the rates at this point or increase the adjustments at this point just seems like a bad time.”
This is a developing story. Check back for updates as more information becomes available.
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