1 May 2023
WICHITA, Kan. (KSNW) — The Federal Housing Finance Agency is changing its pricing framework for loans backed by Fannie Mae and Freddie Mac. What those changes will be is dependent on a variety of factors, such as credit score.
The FHFA said in a statement some updated fees are higher and some are lower. There isn’t a pure increase or pure decrease for high-risk borrowers or low-risk borrowers.
The FHFA statement also says borrowers with high credit scores or large down payments will see their fees decrease or remain flat. The updated fees generally increase as credit scores decrease for any level of down payment, similar to the prior fees.
“The same rules that held true before these changes hold true now,” VP of Real Estate at Credit Union of America Ernest Warren said. “The lower the credit score, the lower the money that you have down for payment, the rate that you would expect is going to be higher based on that risk.”
When it comes down to the price you will end up paying, that is dependent on a variety of factors Warren says are sorted out by your lender.
“You need to rely upon your lender because your lender has and will always be regardless of this change, responsible for making sure that you get the appropriate product with the best rate that meets your affordability needs,” Warren said. “That pricing matrix is just one piece of the equation.”
Warren says the change is based on metrics, adjusting the framework to be more accurate with data.
“What they’ve revealed is that there are a lot of people that have credit scores that may not be top tier that may not have a significant amount of savings, but those loans historically have performed higher than the original risk-based pricing model,” Warren said.
He says the FHFA manages the health of the home lending environment, so steps like adjusting the matrix are necessary.
For home buying in general, a mortgage banker at Leader One Financial Randy Pitts says there are options for people with different needs.
“There’s options out there that don’t include putting 5%, 10%, 15%, 20% down,” Pitts said. “There are No-down-payment zones.”
Pitts says those zones include places such as Andover and Goddard.
He advises people who are looking into home buying not to pre-qualify themselves because sometimes clients are in better shape than they expect.