The cost of getting a loan is going up in 2014. New loan level price adjustments by the Federal Housing Finance Agency (FHFA) will make it more expensive for those obtaining a mortgage by increasing fees for certain qualifying criteria like credit scores and the percentage of money borrowed on the value of the home. Most effected will be those considered to be A paper in today’s market.
Before the housing crisis, those with credit scores above 680 were considered A-Paper and qualified for the best rates and fees. In 2013 that benchmark jumped to 720. In 2014 the number will move higher by 80 points to 800. Anyone with below an 800 credit score may be subject to fee adjustments based on loan amount and the overall percentage borrowed on the home’s value.
Take a look at the chart. If you have a 740-759 Credit Score and get a loan for 85% of the value, you’ll be subject to a 1% fee hike. In Charleston, South Carolina a $300,000 loan will cost the borrower $3,000 more in fees. Or they will have to increase their interest rate to offset those increases.
800 credit scores are rare. Only 13% of Americans have scores over 800. The national average credit score is only 692. One thing that’s surprising about the fee hikes is there are none for lower credit score borrowers. Those with below 660 will not see any increased cost as a result of the new policies.
Why are they making the changes? The main reason is to drive loans into the private sector and away from the quasi government agencies Fannie Mae and Freddie Mac. The problem is the private sector doesn’t exist right now in a manner that would support the mortgage market. So the result will be consumer having to pay higher fees because Fannie Mae and Freddie Mac are the only options.
How can you protect yourself against these fee hikes? It’s simple, buy or refinance before they take effect. The new fee hikes are mandated to start in April 2014 but we will likely see them implemented much sooner. Probably as early as February. So getting under contract to buy a home and locking your rate prior to that will be the key. If your looking for the lowest interest rate mortgage, Coastlend Mortgage can help. We offer free loan approvals for anyone looking to buy, refinance, or that want to see where they stand. Give us a call today. You can also keep up on issuing effecting home ownership by liking us on Facebook at www.facebook.com/coastlendmortgage