Are you aware of the recent changes to mortgage fees by the Federal Housing Finance Agency (FHFA)? Effective May 1st, new rules by the FHFA have adjusted fees to favor lower-income and credit-score individuals, while higher-income and credit-score individuals may experience higher fees. The FHFA oversees both Fannie Mae and Freddie Mac, the two organizations responsible for about half of all U.S. home mortgages. The aim of the Biden Administration is to expand homeownership opportunities for lower-income families who have been underserved. This may lead to higher costs for home mortgage loans for those with excellent credit scores, amounting to thousands of dollars. Nonetheless, individuals with higher credit scores will still receive better interest rates than those with lower scores, although the difference in fees between the two will be smaller.
What you should do
If you are considering a home mortgage loan, it’s important to seek advice from one or more lenders. Also, when considering your options for a mortgage, it’s important to keep the following factors in mind:
- Increasing your down payment for an FHA loan may result in lower fees.
- Weigh the benefits and costs of a conventional mortgage versus an FHA loan before making a decision.
- It’s helpful to examine multiple scenarios and compare up-front costs with long-term expenses.
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Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including 50 Rules of Success; J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaire; and 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. For more information, visit The Welch Group. Consult your financial advisor before acting on comments in this article.
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