Changes made for homebuyers when it comes to credit scores and mortgage rates

Published: May. 9, 2023 at 6:26 PM CDT
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Lake Charles, LA (KPLC) - If you’re in the market to buy a new home, be aware that changes have been made for homebuyers when it comes to mortgage fees.

The new framework is now in play as of May 1 for a Loan-Level Price adjustment or LLPA.

“If you have been pre-approved, earlier this year or even last year, it’s a good time to get with your loan officer that you spoke with and just re-run the numbers,” Cody Heard with Premier Nationwide Lending said. “Just make sure ‘what is my interest rate now? What are closing cost looking like now?’ to see if your afford ability or purchasing power has changed.”

The new rule could mean buyers with higher credit scores will pay more to subsidize those with riskier credit ratings.

“People with lower income, lower credit scores and not as much of a down payment, it’s making it a little more affordable for them,” Heard said. “While on the other hand, someone who has a pretty significant down payment and pretty good credit, it’s making it a little more expensive for them.”

It’s an effort by the Federal Housing Finance Agency (FHFA) to make buying a home more affordable to some after the national rise in housing costs.

“It was nearly unaffordable to be able to qualify and to be able to afford the cost you would incur to get an interest rate,” Heard said.

He said this is certainly no reason to sabotage your credit as those with high scores still come out on top.

“It’s still more expensive if you were to take the two borrowers side-by-side, someone with a 620 and someone with a 740,” Heard said. “It’s going to be more expensive for the person with the 620 credit score to get a loan, but it’s just a little more expensive than it was for the high credit borrower and a little bit cheaper than it was for the lower credit borrower.”

Heard said this new rule will only apply to conventional loans and doesn’t impact loans issued by the government.