The Federal Housing Finance Agency (FHFA) announced Monday at the Mortgage Bankers Association’s conference that it will eliminate certain homebuying fees for some first-time and low-income homebuyers, making it cheaper for them to purchase a home.
Guaranteed fees (G-fees) are paid to the mortgage-backed security issuer, or the company that secures a mortgage loan such as Fannie Mae and Freddie Mac. The fees go toward the issuer’s administrative costs but also reduces the risk and potential for loss if the borrower defaults on the loan.
In 2020, the average G-fee was 54 basis points, or 0.54% of the total loan amount, according to data from the FHFA. These fees are typically passed on to borrowers in the form of a higher interest rate.
"FHFA is eliminating upfront fees for certain first-time homebuyers, low-income borrowers, and underserved communities to promote sustainable and equitable access to affordable housing," FHFA Director Sandra Thompson said. "Today’s announcement will result in savings for approximately one in five borrowers of the enterprises’ recent mortgage acquisitions."
If you are looking to buy a home, shopping across multiple mortgage lenders can help you compare your options and get the best interest rate, saving you money. You can visit Credible to find your personalized interest rate without affecting your credit score.
FHFA eliminates G-fees for these borrowers
The FHFA said it expects this change to go into effect "as soon as possible." Here is who qualifies to eliminate their G-fees on a new mortgage:
- First-time homebuyers who make 100% of area median income (AMI) or less across most of the U.S. and below 120% of AMI in high-cost areas
- HomeReady and Home Possible loans (which are Fannie Mae and Freddie Mac’s affordable mortgage programs that allow homebuyers to purchase a home with a 3% down payment)
- HFA Advantage and HFA Preferred loans
- Single-family loans supporting the Duty to Serve program
The FHFA also announced that it will begin implementing new upfront fees to cash-out refinances, starting on Feb. 1, 2023.
If you want to buy a new home or refinance your existing mortgage, you can visit Credible to compare multiple mortgage lenders at once and find the one with the best interest rate for you.
FHFA's G-fees for larger loans, second homes
Earlier this year in April, the FHFA announced a price increase for those taking out a jumbo loan or a mortgage on a second home. Fees for these loans rose between 0.25% to 0.75% per borrower.
This came amid rising home prices in the U.S. Home prices increased by 15.8% annually in July, which was down from June’s annual increase but remains significantly stronger than historical averages, according to the latest Case-Shiller report.
But when this increase went into effect, certain programs for low-income and first-time homebuyers such as HomeReady, Home Possible, HFA Preferred and HFA Advantage were not included.
If you are looking to tap the increased equity in your home, you could consider using a cash-out refinance before fees rise next year. To see if this is the right option for you, contact Credible to speak to a home loan expert and get all of your questions answered.
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