At the same time the Fed is speculated to reduce rates from .25 to .5 a point, Fannie Mae and Freddie Mac conspire to tack appalling fees to their loans. No. These are not fees applicable only to sub-prime borrowers, these fees are directed at the prime borrower (credit scores of 620 and above.)
An FHA loan previously included a 1.5% up-front fee for PMI. Now, if you have a score between 620 to 639, you can just tack another 1.75% onto your fees.
OUCH! What are they thinking? On a $200K purchase, the PMI adds $3000 to the pre-paid finance charges. With the new fees imposed by Fannie Mae and Freddie Mac an additional $3500 will be required in pre-paid finance charges for anyone with a score between 620 - 639.
The only way to make that up-front fee go away is to increase the interest rate, but it just doesn't work that way. Most lenders cap yield spread premium on FHA loans to such a low amount that raising the rate to cover the new up-front fee isn't an option. This is cash out of pocket folks. Pockets that are already being turned inside out, picking through the lint to find the money to get into a home.
Fee Structure Based on Credit Score
< 620 | 2.0 % |
620 - 639 | 1.75% |
640 - 659 | 1.25% |
660 - 679 | 0.75 |
Come on, Uncle Sam. Do you really think we can afford any more help like this?
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