A little-known mortgage surcharge set to change on May 1 could impact homebuyers in different ways.
A little-known mortgage surcharge is getting an overhaul on May 1 that could impact home buyers in very different ways, potentially helping those with lower credit scores by lowering their costs. But some borrowers with stronger credit scores could end up paying more.
"Housing affordability remains the biggest challenge for home shoppers today," he noted."Some borrowers will pay slightly lower fees, and some other borrowers will pay slightly higher borrowing costs than they did before."These are fees charged by Fannie Mae and Freddie Mac that are chiefly based on a homebuyer's credit score and the size of a down payment.
However, the changes are complex and don't uniformly increase LLPAs for people with high credit scores. Some people with good credit scores will see no change, while a few types of borrowers with high scores could see a slight improvement. For instance, buyers with a credit score of above 780, considered excellent, and who make a downpayment of 5% will see their LLPA decline by 0.625 percentage points.
"Having a good credit score continues to confer an advantage under the new fee structure, although to a diminished degree at some levels of the loan-to-value ratio," Sethi noted.
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