Should I lower my credit score to get a cheaper fee? "Having a good credit score continues to confer an advantage under the new fee structure, although to a diminished degree at some levels of the loan-to-value ratio," Sethi noted.īut, as noted above, the fees have been cut for many types of borrowers with lower credit scores and raised for those with higher scores, meaning that the spread between the two types of borrowers is now narrower. No, because those with higher credit scores are still paying less than those without strong scores, experts say. "The updated fees, as was true of the prior fees, generally increase as credit scores decrease for any given level of down payment." So are home buyers with higher credit score buyers actually paying more? "Higher-credit-score borrowers are not being charged more so that lower-credit-score borrowers can pay less," she said. Thompson said in a statement on Tuesday that the fee change is being misinterpreted and that the new payment structure is part of an overhaul that started in 2021 partly as a way to "maintain support for purchase borrowers limited by income or wealth." What does the the government say?įHFA director Sandra L. "Those with reasonably high credit scores and substantial wealth choose to lower their down payments strategically in order to benefit from lower fees," he wrote. That could have an "unintended consequence," noted Rajiv Sethi, a professor of economics at Barnard College and Columbia University, in a blog post. For instance, buyers with a credit score of above 780, considered excellent, and who make a downpayment of 5% will see their LLPA decline by 0.625 percentage points. Some people with good credit scores will see no change, while a few types of borrowers with high scores could see a slight improvement. However, the changes are complex and don't uniformly increase LLPAs for people with high credit scores. The National Association of Realtors has come out against the overhaul, arguing that the new fee structure could hurt some buyers at a time when affordability remains challenging. Some experts believe the new rules are unfair because they effectively penalize buyers with higher credit scores, while others are worried the change could have a potentially chilling impact on purchases. For the purchase of a $200,000 home, that means the fee will double to $2,000. For instance, homebuyers with credit scores of 740 to 759 - considered "very good" - and putting 20% down will face a new LLPA of 1%, compared with 0.5% previously. That means someone purchasing a $200,000 home would pay an LLPA fee of $3,000 under the new structure, down from $5,000 previously.īut some purchasers won't get as good deal as they did before. Prior to the change, the fee for this group of buyers was 2.75%. "The spread of fees between low and high credit score borrowers won't be as big," Divounguy said.įor instance, starting next month a homebuyer with a credit score between 640 to 659 - considered "fair" - and who has a down payment of 5% will incur an LLPA of 1.5%. The FHFA is recalibrating the fee structure for LLPAs starting on May 1 by lowering fees for some borrowers and hiking those for others.
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