Fannie Mae raises fees

In an interesting move, Fannie Mae announced they are raising their fees this spring.  What’s even more interesting is that it will affect buyers who have higher credit scores.  This will make mortgages more expensive for a lot of people.

These fees are called “add-on” fees.  They’re basing the cost on your credit score and the amount you’re going to put down for a down payment.  And the cost could be anywhere from a quarter of a percentage of the loan amount to 2.75%.

An example of how this works from this Washington Post article: If you want to buy a $300,000 home and have a great credit score of over 800 with just under 25% down, you’ll be charged .25% or $750.  Previously your cost would have been $0.  Now if you have a credit score of 679 and a down payment of less than 20%, you’ll be charged 2.75% or $8,250.  And it matters what you purchase.  A condo will cost you more than a single-family residence.  You can choose to pay these fees up front or tack them on to your mortgage.  Do know that by adding it to the cost of your mortgage that you’ll be paying interest on it for the length of your loan.  So if you can find a way to pay it up front, you’ll save more money in the long run.

Fannie Mae never specifically stated the exact reason for the rate hikes.  But it’s been speculated that it softens their risks on the loan (hence the lower fees for those with better credit scores and higher down payments) as well as the money they’ve lost because of the current housing market and unpaid mortgages.

So will this prevent some people from purchasing a home?  I doubt it will have any adverse reaction on the already declining mortgage market because you’re stuck paying it no matter what.  And it’s not significant enough to make a difference, especially when buyers can purchase homes for a lot less than they could have years ago.

What’s your take on the fee increase?  Do you think it will affect the housing market?  I’d love to hear your opinions.  Please leave a comment or visit me online.