These costs aren’t new. They date back to the 2008 financial crisis, when housing prices plunged and mortgage defaults soared, devastating Fannie Mae and Freddie Mac. These fees helped shore up the companies’ finances and are now used to pay for the guarantees these companies provide.
Under the new pricing structure, mortgage borrowers with higher credit scores — and down payments of about 15 percent to just under 20 percent — saw fees climb the most, while those with lower scores and down payments had the most significant declines. Critics seized on the seeming inequity of it all, including a chart that focused on how much prices were changing — but not the actual end costs.
Broadly speaking, a borrower’s costs on the average $300,000 loan were projected to rise 0.04 percentage points, or $10 a month.
But the specifics will vary based on your circumstances. Consider a borrower with a 740 credit score and a down payment of 20 percent. On a $300,000 mortgage, her upfront fee will rise to $2,625, or 0.875 percent of the loan, from $1,500, or 0.5 percent. If the borrower didn’t pay the fee at closing, it could be baked into her interest rate — and the higher charge would add roughly 0.125 percentage points to the overall rate, or $25 a month, according to calculations by Mark Maimon, a senior vice president at NJ Lenders.
The change is more significant for a borrower with a score of 630 and a down payment of just under 5 percent — the upfront fee drops to 1.75 percent of the loan amount from 3.5 percent. On a $300,000 loan, that translates to $5,250, down from $10,500.