Hearing news about people with good credit scores paying more for mortgages? Here’s why that’s not true.
Did you see the recent news about a “new” tax on mortgage borrowers with higher credit scores? We know we did! Let’s separate some fact from fiction.
FACT: Loan Level Price Adjustments (LLPAs) are changing on loans that are backed by Fannie Mae and Freddie Mac. LLPAs are fees that are charged to the loan through interest rate pricing, and are determined based on loan features like your credit score, loan-to-value (how much you put down), and other loan features.
FACT: The fee structure that was already in place for LLPAs has been tweaked to be more favorable for those with lower credit scores, but there’s no scenario where someone with lower credit will have a lower fee than someone with higher credit who puts down the same amount of money.
FACT: Fannie and Freddie have a mission to promote affordable homeownership, which they are doing by reducing fees on home purchases for those with lower credit scores as well as helping First time Homebuyers with low to moderate income.
FICTION: People with higher credit scores will pay higher fees than those with low credit scores. [TRUTH: People with lower credit scores will still pay higher fees, just not as high as they were previously.]
FICTION: Fannie and Freddie are instituting an “unfair” mortgage tax on people with high credit scores. You might as well lower your score to get a lower interest rate. [TRUTH: While in some cases people with higher credit scores might pay more than they did previously, they will not pay more than someone with a lower credit score.]