CAPE CORAL, Fla. — A big change is in effect if you're in the market of buying a home. A new federal rule will make it more expensive to purchase a house, if you have a good credit score.
The new rule is from the Federal Housing Finance Agency, which is the oversight for Freddie Mac and Fannie Mae. Those companies provide money to mortgage lenders for home buyers.
To break it down, Tony Lee, a Cape Coral mortgage broker talked with Fox 4 and provided this example:
If you have a 740 credit score and you put down 20% on a $400,000 home, you will pay $3,500 in fees rather than $2,000. Imagine the same scenario, but with a 640 credit score. You'll pay $6,000 in fees rather than $11,000.
"I'm not a fan of it. I don't think you'll find too many people in the lending industry that are a fan of it," Lee said. "It's going to affect affordability."
The FHFA is trying to make home buying more attainable for people with lower credit scores. The caveat is people with good credit scores are paying more to offset the costs.
The fee is called the loan-level price adjustment, which takes several factors into account such as credit score, price of the house, size of the home and more.
"It's [LLPA] a price that they add into your loan that actually determines your mortgage rate," Lee said. "The sweet spot where people are affected the most is going to be between 720 and 760 credit scores."
Lee says this is the case for most homeowners. Many tend to put down around 10-15% for a home.
The fees will not impact everyone the same way.
"The person with the better credit score still gets a better interest rate, it's just they don't get as good of a one as they could've got three months ago," Lee explained.
Lee says this will make things harder on our already stretched market.
"I think it makes it tougher to buy a home for people that are on tighter budgets, so I don't think it helps any at all," he said. "It makes it to where interest rates are affected by about an eighth to a quarter, depending on the loan size."
These fee changes are only for mortgages backed by Fannie Mae or Freddic Mac, which are conventional loans. This does not apply for mortgages such as the VA loan or the Federal Housing Administration.
The same agency behind the fee plans to start another in August, targeting debt to income ratio, which could also affect a lot of potential buyers, too.
