Is having a high credit score costing you money on your mortgage?

I’ve had a number of people come up to me recently and ask about what’s happening with the new mortgage rates and the fees that are going to “unfairly punish those with higher credit scores” and give breaks to those with terrible scores.  Now, I’m a REALTOR, I’m not a mortgage lender, but I do stay informed and involved and try to be in-the-know when it comes to my industry as a whole.  So, I’ll try to keep this a bit brief since Matthew Graham at Mortgage News Daily wrote a wonderful piece on this already.  As he did, I will also work to keep this free of any political views or personal thoughts on whether this move is right, wrong, or otherwise, and simply display the facts as I know them and the reasoning behind the change.

To start, no, having a lower credit score will NOT cause you to have lower fees and pay less on your mortgage purchase loan or refinance than someone with a higher credit score.  What this decision has done, however, is decrease the gap in fees and payments between the varying credit score groups.  Mainly, it has decreased the penalties for the lower scores while minimally increasing some of the costs for the higher scores.  The Mortgage News Daily article that I linked to above has beautifully colored charts and matrices which show the exact breakdown and what changes took place.  I highly suggest looking at those and seeing for yourself how this impacts the full spectrum of potential borrowers.  Or chat with a loan officer or mortgage professional for a more detailed and personal look.

You’re probably wondering to yourself (or out loud to others) why was this done and why so suddenly.  This was originally announced in January of this year after some discussions in October of 2022.  The announcement was to provide significant notice to help ease any potential disruption and it laid out the “delivery date” of May 1, 2023.  The Federal Housing Finance Agency (FHFA) released a statement about it where Director Sandra L. Thompson said:

“These changes to upfront fees will strengthen the safety and soundness of the Enterprises by enhancing their ability to improve their capital position over time. By locking in the upfront fee eliminations announced last October, FHFA is taking another step to ensure that the Enterprises advance their mission of facilitating equitable and sustainable access to homeownership.”​​

By increasing the ability for more potential borrowers to qualify for a mortgage, they are working to get more buyers into the market and begin their journey to homeownership.  Once again, I am not a mortgage lender so if you have specific questions or want to run some numbers about what various lending options might look like for you, I have some wonderful connections that I would trust to get you that information.  But, if you’re ready to begin your house-hunting journey, or you’re stuck wondering even where to begin, I can help with that and I’d love to be a resource for you on that trip.

I’m never too busy to help and answer questions and I’d love to talk with you more about it.