Not only have interest rates been steadily rising of late, but now the cost of actually getting a mortgage is going up as well. If you are on the fence about buying or refinancing, the magic date is now April 1st to have something under contract to avoid much higher fees. This increase in cost will most impact the thriving FHA market unfortunately. The vast majority of all home loans are FHA and with the increases set for April 1st, buyers can expect not only higher upfront fees, but also higher paymentson monthlymortgage insurance of $200 a month or more depending on the loan amount.
A recent Wall Street Journal article highlighted these changes well. A snippet is below. Click here to read to the full article so you know better what to expect. Regardless, March is going to be a make or break time for many buyers. If you are sitting on the fence, don't miss out!
Fannie Mae and Freddie Mac, which provide liquidity to the mortgage market by buying mortgages and selling securities backed by them, are adding new fees to loans to people with the best credit and raising existing loan fees. Freddie's new fees start March 1, while Fannie's kick in April 1.
Neither Fannie nor Freddie have been assessing fees on most loans for borrowers with credit scores above 720, even if the down payment was small. But citing a need to address risk and price their services appropriately, they will assess a fee of 0.25% to 0.5% of the loan value on borrowers with credit scores of 720 or higher who put down less than 25% of the purchase amount. The current fee for those with credit scores of 700 to 719 who put down less than 20% of the purchase price will double to a full percentage point of the loan value from half a point.
Brokers expect the higher fees will translate into slightly higher mortgage rates.
In addition, the Federal Housing Administration, saying it needs to bolster its capital reserves, is raising its required annual mortgage-insurance premium for FHA loans by 0.25% of the loan value. As a result, FHA loanswhich are aimed at first-time home buyers and those with moderate incomeswill include an upfront mortgage insurance payment of 1% of the loan amount and an annual premium of 1.1% to 1.15% when the increase goes into effect on April 18.
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