05/02/2023
Have you heard the rumblings in the media that Fannie Mae and Freddie Mac have changed their pricing; making it cheaper for lower credit score borrowers to purchase and increasing fees on higher credit score clients? Well, here are a few key take-aways about the new changes.
• First and foremost, if you have great credit, you will STILL receive better pricing than someone with lower credit scores putting the same amount down as you! This has not changed!
• The credit score that they based their best pricing went from a 740 middle credit score to a 780 middle credit score, so you need a 780+ credit score to get the BEST possible pricing!
• If you have a 780 middle credit score, putting at least 25% down your pricing will be better than what it would have been under the old pricing model.
• Regardless of credit score, the old pricing model would give you the same pricing whether you put 5%-19.99% down if you had greater than a 700-credit score. Now there is a pricing adjustment from 5%-9.99%, 10%-14.99% and 15%-19.99% for all buyers. Get this, in all of the cases that reviewed you will get a BETTER rate if you put less money down when comparing 5%, 10% and 15% down payments!
• Thinking of purchasing a multi-unit (2-4 units) or a manufactured home? The adjustments are better for the borrower across the board for these different types of homes.
• Investment home pricing is better if you put at least 30% down.
o So, if you are in the market for an 2–4-unit investment home with at least 30% down you will be receiving a significant betterment to your pricing!
• If your debt-to-income ratios are higher than 40%, you will have higher fees.
• The largest fee increase is for clients with credit scores from 720-759 with 15%-19.99% down increasing the fees .75% so if you fall within this credit score/down payment you might want to look at increasing or even decreasing your down payment for a better rate.
These are just a few highlights of some of the PURCHASE changes under conventional financing. There are pricing changes for rate term refinances and cash out refinances as well. Please note that FHA, VA, USDA and US Bank’s portfolio loans did not change their pricing structures. Please call me at 469-712-6712 with any questions regarding your situation!
Important terms:
• Fannie Mae and Freddie Mac: Government Sponsored Enterprises (GSEs) that are the main investor of mortgages. If you are using “conventional” financing your loan will be sold to one of these companies. The conventional loan limit changes every year and the maximum loan amount is $726,200 as of 2023 in most areas.
• Pricing: The fees/cost to lock in a certain rate based on your credit score, down payment, type of home, use of home and your debt-to-income ratios
• Debt-to-income ratio (DTI): Your monthly obligations (including but not limited to your housing payment, credit cards, student loans, child support, etc.) divided into your monthly income. For example, if someone’s total monthly obligations were $4,000 a month and their gross monthly income (pre-tax if you are a W2 wage earner) was $10,000 a month their DTI would be 40%.
