Unwrapping the Mystery of Those New Mortgage Fees
As if the real estate market weren’t confusing enough, the Federal Housing Finance Agency has implemented new rate schedules. Though the change was announced this January, it took a few months before the industry realized the bottom line: rates were going up for borrowers with good credit and down for those with lower credit scores. Understandably, both industry professionals and home buyers were confused.
Here’s an example of how this will work. Under the new policy, a borrower with a higher credit score will pay an .875 percent fee for an 80 percent loan-to-value loan. Formerly, they would pay a .5 percent fee, so that borrower would pay an additional $1,313 on a $350,000 mortgage. In contrast, a borrower with a lower credit score borrowing the same amount for an 80 percent loan-to-value mortgage will now pay a 2.25 percent fee instead of the former 3 percent, yielding a savings of $2,813.
So it still pays to have a good credit score. Sandra Thompson, the director of the Federal Housing Finance Agency, puts it this way: “Higher-credit-score borrowers are not being charged more so that lower-credit-score borrowers can pay less. The updated fees, as was true of the prior fees, generally increase as credit scores decrease for any given level of down payment.”
This and other changes in home financing are among the factors slowing down the home market, which are reflected in the latest market figures for the greater Charlotte area. As of April 30, 2023, the median sales price inched downward by $4,100, or 1.1% compared to last year’s average of $380,000, to $375,900. An even stronger indicator that the market is cooling, as well as tilting back toward balance between a sellers and buyers market, is in the number of days on market until sale. Last April’s average of 16 days on the market has slowed down by 23 days to 39 days, a 143.8% increase. Another significant indicator of a market slowdown is the inventory of homes for sale. An additional 1,018 units are now on the home market compared to last year’s total of 3,679, a big boost of 27.7%, to a new total of 4,697 homes.