Beginning May 1, 2023, the updated fees and costs that apply to most new mortgages in the United States will go into effect. This change was originally announced in January of 2023 by the Federal Housing Finance Agency (“FHFA”), which is the agency that regulates Fannie Mae and Freddie Mac. According to the FHFA, this change is intended to “advance [the] mission of facilitating equitable and sustainable access to homeownership.”
So, what is changing under the new framework? The biggest change is evident in the upfront fees that borrowers pay based on their credit score and down payment size, known as Loan Level Price Adjustments (“LLPAs”). The revised LLPA pricing structure increases fees for many borrowers with high credit scores (680 and above) and reduces fees for most borrowers with a score lower than 680. The biggest increase affects borrowers with a credit score of 680 or higher who make a 15-20% downpayment. Conversely, all borrowers paying 5% or less as a down payment will see lower LLPAs regardless of credit score.
The result is more favorable mortgage rates for buyers with a credit score lower than 679 and smaller downpayments than under the previous system. Ultimately, borrowers with lower credit scores will still pay more fees than those with higher scores, but this new structure shrinks the gap and reduces the “penalty” for having a score under 680.
Revolution Law Group is located in Greensboro, NC, and serves individuals and small businesses throughout the Triad and surrounding areas. To contact us please visit Revolution.law or call 336-333-7907.
The information included here is for informational purposes only, is not exhaustive of all considerations when creating documents, is not intended to be legal advice, and should not be relied upon for that purpose. We strongly recommend you consult with an attorney and do not attempt to create your own documents.