Borrowers will likely see an increase in mortgage costs next spring, particularly those who lack a sizable down payment or have less-than-perfect credit scores. Mortgage giants Fannie Mae and Freddie Mac are raising the fees they charge lenders, which is expected to get passed on to borrowers.
According to Fannie Mae’s web site, here are some of the increases that borrowers can expect:
- A borrower with a 30-year fixed-rate mortgage, a credit score of 735, and a 10 percent down payment will see fees rise from the current rate of 0.75 percent to 2 percent of the loan amount.
- For those borrowers making a 10 percent down payment and who have a 750 credit score, fees are to increase from 0.5 percent to 1.5 percent of the loan amount.
- Borrowers with credit scores of 775 and a 10 percent down payment will see fees rise from 0.5 percent to 1 percent.
Borrowers with higher down payments aren’t likely to escape some rises in mortgage costs either. For example, borrowers who have a down payment of 25 percent but a credit score of 690 will see fees rise from 1.5 percent to 2.25 percent.
Analysts predict that higher fees combined with rising interest rates and new mortgage rates could further tighten mortgage credit in the new year.
“It’s another headwind for housing on top of other headwinds that, individually, might have been manageable,” says Ivy Zelman, chief executive of Zelman & Associates, a housing research and advisory firm.