MORTGAGE CORNER
No, having good credit is NOT going to cost you more on a mortgage, and other mortgage myths...
The headlines are everywhere the last few days about how mortgage costs are going up on May 1st, and how borrowers with higher credit scores will pay higher fees than borrowers with a lower score. Although there are some truths woven into this narrative, the reality is that most of this information is wrong.
Here are a few things to know...
1. These changes take place for loans received by Fannie Mae and Freddie Mac after May 1st, but were actually announced back in January. That means the loans were closed in March or April, and the fees were already applied by most lenders since late February.
TAKEAWAY: These fees have been applied for months already and are not starting on May 1st.
2. The headlines screaming that higher credit scores are going to pay more are taking things out of context, and some are just wrong because they are misinterpreting a graph that was created by a popular mortgage site showing the difference between old fees and the new fees rather than actually referencing the fees themselves.
TAKEAWAY: Borrowers with a higher credit score will always pay less than a borrower with a lower credit score in the same situation, putting the same amount down.
3. Putting a higher percentage of money down CAN lead to higher fees in some situations. However, that doesn't mean it is a good idea to put less down, because this doesn't account for mortgage insurance that is needed that makes them more expensive.
This is a bit confusing, that putting more money down would actually lead to higher fees. It has to do with risk to the agencies, and factors in the mortgage insurance which helps offset some of that risk. Under the old structure, there were situations that this also occurred.
TAKEAWAY: How much you decide to put down can affect the mortgage fees paid, as well as mortgage insurance and how likely your offer is to be accepted or to compete with other offers and is a conversation best had with a mortgage professional.
What isn't being reported?
All borrowers putting down 5% will now pay less fees than previously required!
If you want to know more about the new fees, just contact me and I'd be glad to tell you the REAL information.