If you’re a prospective homebuyer/homeowner seeking mortgage financing using ‘conventional loans’, you could end up paying more come April 2014.
‘Conventional loans’ = Fannie Mae and Freddie Mac, aka Government-sponsored enterprise (GSE) loans.
Earlier this month, the Federal Housing Finance Agency ordered Fannie Mae and Freddie Mac to increase charges called “guarantee fees,” or g-fees, that are embedded in the cost of home loans to protect investors from losses. Theoretically, raising these fees would bring private capital back into the mortgage market and better reflect a borrower’s credit risk.
For loan officers, this will likely make it more difficult to determine whether a borrower is a better candidate for a GSE loan or a loan through the Federal Housing Administration (FHA). But for borrowers, the potential impact is much more significant: adding thousands of dollars to closing costs.
Starting March 2014, the Loan-Level Price Adjustment fees, or LLPA fees, of GSE loans may be raised for borrowers with credit scores above 660 and a down payment of less than 30%. Borrowers with scores between 680 and 760 who are making a 5% to 10% down payment could see an interest rate that is 3/8 of a percent higher.
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