fact vs. Fiction: Higher fees for borrowers with higher credit scores? not necessarily.

Higher fees for borrowers with higher credit scores?  not necessarily.  Fact versus fiction.

Do you hear about people with good credit scores paying more for mortgages? Here’s why that isn’t true.

Have you seen the recent news about a “new” tax being imposed on subprime borrowers with higher credit scores? We know we did! Let’s separate some facts from fiction.

fact: Loan Level Price Adjustments (LLPAs) change on loans backed by Fannie Mae and Freddie Mac. LLPAs are fees charged to the loan through interest rate pricing, determined based on features of the loan such as your credit score, loan-to-value (the amount you put down), and other loan features.

fact: The fee structure that was already in place for LLPAs has been modified to be more suitable for those with lower credit scores, however There is no scenario where a person with lower credit has lower fees than someone with higher credit who puts in the same amount of money.

fact: Fannie and Freddie have a mission to promote affordable homeownership, which they do by reducing fees on home purchases for those with low credit scores as well as helping first-time homebuyers with low-to-moderate incomes.

imaginary: People with higher credit scores will pay higher fees than those with lower credit scores. [TRUTH: People with lower credit scores will still pay higher fees, just not as high as they were previously.]

imaginary: Fannie and Freddie impose an “unfair” mortgage tax on people with high credit scores. You can also lower your score to get a lower interest rate. [TRUTH: While in some cases people with higher credit scores might pay more than they did previously, they will not pay more than someone with a lower credit score.]

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