Here’s a more conversational and easy-to-understand version of your article:
Your credit score can make a big difference when it comes to getting a mortgage. Back in the day, if you had a credit score of 720 or more, you were golden. You could get the best mortgage rates and the lowest fees. But after 2012, the bar was raised. To get the best deals, you needed a score of 800 or more. So, I worked hard to boost my score, and by 2013, I was in the 800 club. This high score helped me get great deals on properties and refinancing.
But what if the tables were turned? What if having a higher credit score meant you had to pay more? That could discourage people from being responsible borrowers and could lead to another housing crisis.
And guess what? That’s exactly what’s happening. The Federal Housing Finance Agency (FHFA) has changed the fee structure. If you have a credit score of 740 or more, you’ll now pay more in fees. For example, on a $500,000 loan, you used to pay a 0.25% fee, or $1,250. Now, you’ll pay as much as 0.375%, or $1,875. That’s a 50% increase!
But it’s not just the fees. If you’re not paying a higher mortgage fee, then you’ll end up with a higher mortgage rate. So, don’t be fooled by a "no-cost refinance."
On the flip side, people with lower credit scores are getting a break. Their fees are being lowered. For instance, a homebuyer with a credit score of between 640 to 659 and a down payment of only 5% will now pay a fee of 1.5%, down from 2.75%.
This change in fees is likely due to the fact that people with higher credit scores make up the majority of borrowers. The government is trying to create more equitable access to home ownership, as the wealth gap between homeowners and non-homeowners has grown too large.
But there’s a catch. This new policy could have a negative impact on Asian Americans, who tend to have higher credit scores. They’re being asked to subsidize riskier borrowers, despite facing higher mortgage rejection rates.
So, what can you do? If you’re looking to buy a home, negotiate with your lender, real estate agent, and seller. You might end up saving even more money. And if you’re an Asian American, you might need a credit score of 760 or more to get a similar mortgage as other races. Keep your debt-to-income ratio as low as possible and speak up if you feel you’re being treated unfairly.
In the end, having a higher credit score and being financially responsible is still beneficial. It makes life easier. And if others who are struggling are getting a break, then that’s a good thing. After all, we’re all in this together.
What do you think about this new policy? Do you think it’s fair for people with lower credit scores to pay lower fees? Let’s discuss.
