High credit score borrowers penalized under new federal mortgage fee plan (2023)

Mortgage borrowers with good credit may face higher costs under a new scheme from federal mortgage associations Fannie Mae and Freddie Mac.The firms have released a new Loan–Level Price Adjustment (LLPA) Matrix for loans sold to them after May 1, 2023. Under the new matrix, borrowers with high credit scores will face higher mortgage fees than before and those with lower credit scores will face lower fees.

"It's unprecedented," David Stevens, a former federal housingcommissioner and former CEO of the Mortgage Bankers Association, told the New York Post. "My email is full from mortgage companies and CEOs [telling] me how unbelievably shocked they are by this move."

The fee increase is unlikely to lead to significantly higher monthly mortgage payments for most borrowers. For instance, someone with a $400,000 loan and a 6 percent mortgage rate may wind up paying about $40 more per month, according to Stevens' calculations.

But an extra $40 per month means an extra $480 per year. And over the whole course of mortgage repayment, a homeowner could wind up paying thousands of dollars more due to the fee shift.

Regardless of what the shift means in terms of actual costs, it seems unfair that borrowers with extremely good credit are effectively being penalized while borrowers with lower credit scores are being rewarded.

"This was a blatant and significant cut of fees for their highest-risk borrowers and a clear increase in much better credit quality buyers – which just clarified to the world that this move was a pretty significant cross-subsidy pricing change," Stevens said.

"Overall, lower-credit buyers will still pay more in LLPA fees than high-credit buyers – but the latest changes will close the gap," notes the Post:

Under the new rules, high-credit buyers with scores ranging from 680 to above 780 will see a spike in their mortgage costs – with applicants who place 15% to 20% down payment experiencing the biggest increase in fees….

LLPAs are upfront fees based on factors such as a borrower's credit score and the size of their down payment. The fees are typically converted into percentage points that alter the buyer's mortgage rate.

Under the revised LLPA pricing structure, a home buyer with a 740 FICO credit score and a 15% to 20% down payment will face a 1% surcharge – an increase of 0.750% compared to the old fee of just 0.250%….

Meanwhile, buyers with credit scores of 679 or lower will have their fees slashed, resulting in more favorable mortgage rates. For example, a buyer with a 620 FICO credit score with a down payment of 5% or less gets a 1.75% fee discount – a decrease from the old fee rate of 3.50% for that bracket.

Mortgage News Daily explained it this way in January when the changes were announced:

The effective penalty for having a credit score under 680 is now smaller than it was. It still costs more to have a lower score. For instance, if you have a score of 659 and are borrowing 75% of the home's value, you'll pay a fee equal to 1.5% of the loan balance whereas you'd pay no fee if you had a 780+ credit score. But before these changes, you would have paid a whopping 2.75% fee. On a hypothetical $300k loan, that's a difference of $3750 in closing costs.

Elsewhere in the spectrum, things got worse. Borrowers with higher credit scores will generally be paying a bit more than they were under the previous structure.…This doesn't necessarily come out of your pocket upfront as lenders can offer higher interest rates in some cases and pay these costs for you (but the costs are still there, and still technically being paid by you over time in the form of higher interest rates).

Federal Housing Finance Agency Director Sandra L. Thompson called it "another step to ensure that [Fannie Mae and Freddie Mac] advance their mission of facilitating equitable and sustainable access to homeownership."​​


Buzzfeed News is shutting down. Former Editor in Chief Ben Smith (now editor in chief of Semafor) explores what went wrong—a story that mirrors larger shifts in the internet-media ecosystem and the evolution of social media platforms and public opinion about them.

"The end of BuzzFeed News also signals a vast shift in digital media that those of us who live inside it are feeling intensely right now, the end of one era and the beginning of another," wrote Smith:

[Buzzfeed co-founder Jonah] Peretti had built BuzzFeed into a traffic juggernaut by being among the first to see the rising social web. But BuzzFeed never found a new path when that trend turned against us — when consumers found their Facebook feeds toxic, not delightful; when platforms decided news was poison; and when Facebook, Twitter, and the rest simply stopped distributing links to websites.

Peretti created BuzzFeed in 2006 while he was working at Huffington Post, as it was then called, which he co-founded. In 2020, BuzzFeed — shaky but still apparently ascendant —acquired HuffPost off the hands of its latest owner, Verizon. (As I recall, they basically paid BuzzFeed to take it off their hands.)

But as the social tide receded, HuffPost's giant, old-fashioned front-page, has remained surprisingly vital. In its first iteration as a liberal answer to the Drudge Report, it had hooked a generation of baby boomers in the mid-aughts with a mix of giddy coverage of Barack Obama and salacious celebrity gossip. Drudge and Huffington Post, the old portals that propped up the internet of the mid-aughts, will outlive the social media age, along with, of all things, Yahoo!.


A new report from the R Street Institute shows alcohol delivery is not correlated to higher rates of alcohol consumption. The report is based on recent data from the National Institute on Alcohol Abuse and Alcoholism (NIAAA) Surveillance Report, which R Street compared to state alcohol delivery rules.

"News stories during the pandemic suggested that liberalizing alcohol delivery laws was causing Americans to drink more," notes C. Jarrett Dieterle, a resident senior fellow at the R Street Institute and the author of Give Me Liberty and Give Me a Drink!

As one Washington Post headline from December 2021 put it: "States rushed to loosen alcohol laws in the pandemic. Heavy drinking went up, some studies say."

The problem is that these "studies" said no such thing. It was clear that more states were allowing alcohol delivery. And there was also evidence showing that Americans were drinking more during COVID-19. But there were no studies showing a connection between these two things. In fact, numerous researchers suggested that "social stressors" like loneliness and greater demands during the pandemic were the likeliest causes of increased consumption.

More here.


More good news out of TN today: the legislature unanimously passed a bill requiring TDOC to equip people leaving prison with a state ID, certified copy of their birth certificate & social security card. Thank you @RepAndrewFarmer & Sen. @ToddGardenhire! pic.twitter.com/7YpdVRKO3E

— Lauren Krisai (@laurenkrisai) April 21, 2023

• Starship, the uncrewed rocket launched by SpaceX yesterday, exploded midair.

• Stacey Plaskett, a Democratic delegate to Congress from the U.S. Virgin Islands, is accusing writer Matt Taibbi of perjury. "The congresswoman's basis for accusing Taibbi of perjury is a handful of errors that he made during the publication of the Twitter Files," notes Reason's Robby Soave. But while "it is true that Taibbi made some errors…it is obviously not the case that Taibbi committed perjury."

• PEN America's latest banned books report is out. "During the first half of the 2022-23 school year PEN America's Index of School Book Bans lists 1,477 instances of individual books banned, affecting 874 unique titles," the organization says.

• From The Free Press: "Having a baby made me even more pro-choice."

• A bill in Alabama (H.B. 229) "would create a review process for the possible resentencing or release" of incarcerated people age 50 and up who have already served at least 15 years in prison and were not in for "a crime that involved serious physical injury to a victim," notes the Alabama Political Reporter.

• "The populist right stumbles into boilerplate progressivism — again," laments Noah Rothman at National Review.

• Utah is making it easier for out-of-state and foreign workers to get licensed to work in the state.

• "Kansas' governor vetoed legislation Wednesday that would require clinics to tell patients that a medication abortion can be stopped using an unproven drug regimen," reports the Associated Press.


How does the new mortgage fee work? ›

Starting May 1, a new schedule of upfront fees applies to mortgages backed by Fannie Mae and Freddie Mac. The new fees will increase costs to borrowers overall by 0.04 percentage point, according to the FHFA. That means a borrower who would have paid a 6.5 percent APR under the old fees would pay 6.54 percent now.

Does my credit score affect my closing cost? ›

Your credit score has a direct impact on the cost of your home loan. Knowing how this works can save you thousands of dollars in closing costs, and much more over the life of the loan by avoiding a higher interest rate.

Do you get penalized for having a good credit score? ›

The effective penalty for having a credit score under 680 is now smaller than it was. It still costs more to have a lower score. For instance, if you have a score of 659 and are borrowing 75% of the home's value, you'll pay a fee equal to 1.5% of the loan balance whereas you'd pay no fee if you had a 780+ credit score.

Do hard inquiries affect getting a mortgage? ›

Your credit score might take an initial hit when you apply for a mortgage because the lender will have to open up a hard inquiry into your credit report. A hard inquiry (a.k.a., a “hard pull”) is when a lender pulls your credit report from one of the three main credit bureaus (Experian, Equifax or TransUnion).

Is it worth adding mortgage fee to mortgage? ›

Is it worth paying a mortgage product fee? It really depends. A mortgage deal with a product fee will often charge a lower interest rate throughout the duration of the mortgage and this is often the key reason for choosing a mortgage product that charges a product fee.

Are mortgage processing fees negotiable? ›

Loan application fees: The loan application fee is a one-time fee your lender charges for processing and underwriting the loan. You can and should negotiate this fee, especially if your lender has charged you several other fees.

What mortgage rate can I get with a 780 credit score? ›

The higher your score is, the less you'll pay to borrow money. Generally, 620 is the minimum credit score needed to buy a house, with some exceptions for government-backed loans.
Average mortgage interest rate by credit score.
FICO ScoreNational average mortgage APR
660 to 6796.806%
680 to 6996.592%
700 to 7596.415%
760 to 8506.193%
2 more rows
May 1, 2023

Do they check credit score before closing? ›

The answer is yes. Lenders pull borrowers' credit at the beginning of the approval process, and then again just prior to closing.

Why did my credit score drop after closing on a mortgage? ›

For most homeowners, taking out a mortgage means taking on the largest sum of debt in their lives. Credit reporting agencies will penalize this new mortgage debt with a short-term ding in your credit score, followed by a significant boost after several months of regular, on-time payments.

Why is 850 credit score bad? ›

An 850 FICO® Score is nearly perfect. You still may be able to improve it a bit, but while it may be possible to achieve a higher numeric score, lenders are unlikely to see much difference between your score and those that are closer to 850.

What hurts credit score the most? ›

Your payment history is one of the most important credit scoring factors and can have the biggest impact on your scores. Having a long history of on-time payments is best for your credit scores, while missing a payment could hurt them.

What is the most damaging to a credit score? ›

5 Things That May Hurt Your Credit Scores
  • Highlights:
  • Making a late payment.
  • Having a high debt to credit utilization ratio.
  • Applying for a lot of credit at once.
  • Closing a credit card account.
  • Stopping your credit-related activities for an extended period.

How many inquiries is too many for a mortgage? ›

There's no such thing as “too many” hard credit inquiries, but multiple applications for new credit accounts within a short time frame could point to a risky borrower. Rate shopping for a particular loan, however, may be treated as a single inquiry and have minimal impact on your creditworthiness.

Which FICO score do mortgage lenders use? ›

While most lenders use the FICO Score 8, mortgage lenders use the following scores: Experian: FICO Score 2, or Fair Isaac Risk Model v2. Equifax: FICO Score 5, or Equifax Beacon 5. TransUnion: FICO Score 4, or TransUnion FICO Risk Score 04.

How many inquiries is bad for mortgage? ›

For many lenders, six inquiries are too many to be approved for a loan or bank card. Even if you have multiple hard inquiries on your report in a short period, you may not see negative consequences if you're shopping for a specific type of loan.

Is it better to pay mortgage fee upfront or add to mortgage? ›

The disadvantage of adding the fee to the mortgage is you'll pay interest on it, as well as the mortgage, for the life of the loan. But if you pay the fee upfront, there's a chance you could lose it if anything went wrong with the purchase.

Can you pay too much for a mortgage? ›

With the 35% / 45% model, your total monthly debt, including your mortgage payment, shouldn't be more than 35% of your pre-tax income, or 45% more than your after-tax income. To calculate how much you can afford with this model, determine your gross income before taxes and multiply it by 35%.

What percentage of a mortgage is fees? ›

Typically, a loan origination fee is charged as a percentage of the loan amount. Furthermore, lender origination fees are usually anywhere between 0.5% and 1% of the loan amount plus any mortgage points associated with your interest rate.

Is it normal to pay a mortgage application fee? ›

Loan application fees are typically most common in a mortgage loan, which includes many ad hoc fees in addition to the monthly interest. Working with a mortgage broker can increase the likelihood of a loan application fee because the broker works as an intermediary on behalf of both the borrower and the lender.

How do I avoid payment processing fees? ›

How to Lower Credit Card Processing Fees and Avoid Extra Costs
  1. Protect Your Devices. ...
  2. Stay PCI Compliant. ...
  3. Find the Best Merchant Services Provider for Your Business. ...
  4. Consider Surcharging or Cash Discounts. ...
  5. Avoid Cancellation Fees.

What is the difference between origination fee and processing fee? ›

An origination fee is what a lender charges in order to set up the loan. Some lenders split this into a processing fee (the cost of taking your application and gathering documentation) and an underwriting fee (the cost to have someone look at your application and determine if you qualify).

How rare is a 780 credit score? ›

A 780 FICO® Score is above the average credit score. Borrowers with scores in the Very Good range typically qualify for lenders' better interest rates and product offers. 25% of all consumers have FICO® Scores in the Very Good range.

Will mortgage interest rates go down in 2023? ›

Mortgage rates are likely to decrease slightly in 2023, although they're highly unlikely to return to the rock-bottom levels of 2020 and 2021. However, rate volatility may continue for some time.

What credit score do you need for a 500000 mortgage? ›

While the exact requirements vary by lender, most lenders want to see a credit score above a minimum of 620. The higher your credit score is, the better interest rates and loan terms you'll receive. So before you try to buy a $500,000 home, make sure that your credit score is where it should be.

What not to do during underwriting? ›

Tip #1: Don't Apply For Any New Credit Lines During Underwriting. Any major financial changes and spending can cause problems during the underwriting process. New lines of credit or loans could interrupt this process. Also, avoid making any purchases that could decrease your assets.

Do they run your credit the day of closing? ›

Credit is pulled at least once at the beginning of the approval process, and then again just prior to closing. Sometimes it's pulled in the middle if necessary, so it's important that you be conscious of your credit and the things that may impact your scores and approvability throughout the entire process.

How many times can you check your credit score without hurting your credit? ›

How Often Can You Check Your Credit Score? You can check your credit score as often as you want without hurting your credit, and it's a good idea to do so regularly. At the very minimum, it's a good idea to check before applying for credit, whether it's a home loan, auto loan, credit card or something else.

How many points does a new mortgage drop your credit score? ›

Your score may also drop because it is a new account and will decrease the average age of all your accounts on credit. On average, those with good credit have their scores drop by 15-20 points when signing a new mortgage loan.

What is the average US credit score? ›

Credit scores help lenders decide whether to grant you credit. The average credit score in the United States is 698, based on VantageScore® data from February 2021. It's a myth that you only have one credit score.

Why did my credit score drop 40 points after paying off mortgage? ›

Credit utilization — the portion of your credit limits that you are currently using — is a significant factor in credit scores. It is one reason your credit score could drop a little after you pay off debt, particularly if you close the account.

How rare is 900 credit score? ›

Only about 1% of people have a credit score of 850. A 900 credit score can be thought of as fairly unrealistic.

Is 800 credit score rare? ›

According to a report by FICO, only 23% of the scorable population has a credit score of 800 or above.

Why is it so hard to get a 800 credit score? ›

Since the length of your credit history accounts for 15% of your credit score, negative, minimal or no credit history can stop you from reaching an 800 credit score. To solve this problem, focus on building your credit. You can do this by taking out a credit-builder loan or applying for your first credit card.

Which of the 3 credit scores is most accurate? ›

Simply put, there is no “more accurate” score when it comes down to receiving your score from the major credit bureaus.

What are 3 things that hurt your credit score? ›

10 Things That Can Hurt Your Credit Score
  • Getting a new cell phone. ...
  • Not paying your parking tickets. ...
  • Using a business credit card. ...
  • Asking for a credit limit increase. ...
  • Closing an unused credit card. ...
  • Not using your credit cards. ...
  • Using a debit card to rent a car. ...
  • Opening an account at a new financial institution.

What is one red flag that could indicate credit discrimination? ›

Look for red flags, such as: Treated differently in person than on the phone or online. Discouraged from applying for credit. Encouraged or told to apply for a type of loan that has less favorable terms (for example, a higher interest rate)

Is it bad to put groceries on credit card? ›

You may end up paying more with interest

Paying with a credit card avoids immediate headaches at the cash register, but snowballing debt can increase your grocery bill. Credit cards have double-digit interest rates, and the longer you let them accrue, the more you will pay in the long run.

What are the four C's of credit? ›

What Are the Four Cs of Credit?
  • Capacity.
  • Capital.
  • Collateral.
  • Character.

What habit lowers your credit score? ›

Not paying your bills on time or using most of your available credit are things that can lower your credit score. Keeping your debt low and making all your minimum payments on time helps raise credit scores. Information can remain on your credit report for seven to 10 years.

How far back do mortgage lenders look at credit inquiries? ›

The typical timeframe is the last six years. Your credit history is one of the many factors that can affect your ability to get approved for a mortgage and a lender can pull up one of your credit reports to see financial information about you, within minutes.

How do I get rid of hard inquiries on my mortgage? ›

How Do You Dispute (and Remove) Unauthorized Inquiries?
  1. Obtain free copies of your credit report. ...
  2. Flag any inaccurate hard inquiries. ...
  3. Contact the original lender. ...
  4. Start an official dispute. ...
  5. Include all essential information. ...
  6. Submit your dispute. ...
  7. Wait for a verdict.
Feb 6, 2023

Can I get mortgage inquiries removed? ›

Disputing hard inquiries on your credit report involves working with the credit reporting agencies and possibly the creditor that made the inquiry. Hard inquiries can't be removed, however, unless they're the result of identity theft. Otherwise, they'll have to fall off naturally, which happens after two years.

Which credit score matters more TransUnion or Equifax? ›

No credit score from any one of the credit bureaus is more valuable or more accurate than another. It's possible that a lender may gravitate toward one score over another, but that doesn't necessarily mean that score is better.

What does FICO score 8 mean? ›

FICO 8 scores range between 300 and 850. A FICO score of at least 700 is considered a good score. There are also industry-specific versions of credit scores that businesses use. For example, the FICO Bankcard Score 8 is the most widely used score when you apply for a new credit card or a credit-limit increase.

How much of a home loan can I get with a 720 credit score? ›

You can borrow $50,000 - $100,000+ with a 720 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.

How to get 800 credit score in 45 days? ›

Here are 10 ways to increase your credit score by 100 points - most often this can be done within 45 days.
  1. Check your credit report. ...
  2. Pay your bills on time. ...
  3. Pay off any collections. ...
  4. Get caught up on past-due bills. ...
  5. Keep balances low on your credit cards. ...
  6. Pay off debt rather than continually transferring it.

Is 12 hard inquiries bad? ›

However, multiple hard inquiries can deplete your score by as much as 10 points each time they happen. People with six or more recent hard inquiries are eight times as likely to file for bankruptcy than those with none. That's way more inquiries than most of us need to find a good deal on a car loan or credit card.

Can you buy a house with a lot of inquiries? ›

After all, your credit score determines your interest rate, and a low interest rate can save you thousands of dollars during the life of your home loan. The good news is, multiple inquiries from different lenders are typically counted as only a single inquiry — as long as they're made within the same 14 to 45 days.

What do mortgage fees include? ›

Common charges are labeled origination fees, application fees, underwriting fees, processing fees, administrative fees, etc. Points. Points are a charge you pay upfront to the lender. Points are part of the price of borrowing money and are calculated as a percentage of the loan amount.

What is a new first charge mortgage? ›

What does the “first charge” part mean? When using a mortgage to cover the costs of a property purchase, the lender takes a legal 'charge' against the property. Since this would be the first such legal charge attached to the property, it's referred to as a first charge mortgage.

Why not to pay extra on mortgage? ›

Monthly payments: Paying extra on a mortgage doesn't normally lower your monthly payment, so you'll still need to keep that regular monthly payment in mind. Cash flow: With extra payments going toward your mortgage, you may have less cash to spend on other necessities.

Should I pay early redemption fee? ›

The world of mortgages can often feel quite complex with all the jargon but if there's one thing that everyone 'gets', it's that paying an early redemption charge (ERC) is never a good thing. Unfortunately, that's not true. Paying an ERC can actually save you money – and lots of it.

What fees can be collected upfront for mortgage? ›

What fees or charges are paid when closing on a mortgage and who pays them?
  • Appraisal fees.
  • Tax service provider fees.
  • Title insurance.
  • Government taxes.
  • Prepaid expenses such as property taxes, homeowners insurance, and interest until your first payment is due.
Sep 8, 2020


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