Changes coming to application process for mortgages
MONTGOMERY, Ala. (WSFA) - There is some confusion behind the latest mortgage rule changes made by Fannie Mae and Freddie Mac, the agencies that make guidelines for pricing conventional loans nationwide.
Many people may think that these changes mean people with lower credit scores can get a lower mortgage interest rate because of this change.
Jimmy Parsons, the Branch Manager at Guild Mortgage, says that those with lower credit scores will still have higher rates and fees than homebuyers with higher credit scores.
However, fees for lower credit score buyers with less than 5% down have been lowered. This will make homebuying more affordable.
Another adjustment is for a small category of people with a credit score between 720 to 759 who put 15-19% down on their mortgage.
This adjustment is higher than what was in the past. As a result, these particular buyers have been able to drop PMI insurance faster than usual, which has created higher risk.
So for new homebuyers putting 15-19% down, there may be a slightly higher fee going forward.
“Fannie Mae and Freddy Mac realized that those buyers were putting down lower than 20 percent down but a little bit more than 15 percent down, and when you do that, you do have to have PMI but a very small amount now PMI is insurance that protects Fannie and Freddie against any default,” said Parsons.
Existing homeowners may be wondering, will this affect my current mortgage? The answer is no!
This will only affect home buyers starting May 1st.
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Source: WSFA
