In late October, Fannie Mae eliminated most of the fees (that effectively increased the interest rates) for first-time homebuyers (FTHBs).
I blogged about it in November – Fannie Mae Made Rates Way Lower for First-Time Homebuyers – and I strongly recommend re-reading that blog, as I want to make sure readers know how HUGE this really is.
It is not only real estate agents who are unaware of this, but loan officers too, as many mistakenly believe that this program is just Fannie’s “HomeReady” program (which has much tighter income limits and has been around for years).
Fannie’s latest effort to help FTHBs is far more expansive. And what it does is eliminate most of the fees that homebuyers would normally pay that get baked into the rate (the rate is increased to cover the fees).
These fees are for things like credit scores, property types (condo vs. SFR), and down payment percentages/loan-to-value ratios – and they can impact rates by over 1.5%!
Example Of How Much Lower Rates Are For FTHBs
ASSUMPTIONS: $750,000 PURCHASE PRICE; 5% DOWN; CONDO; 675 FICO
Prior to October, this buyer would have had to pay 0.75 points for the property type (CONDO) and an additional 2.25% points for the small down payment and low credit score.
That is a total of 3 points that would have resulted in a rate increase of about 1.5% – in order to absorb those points.
Today’s interest rate WITHOUT Fannie’s New FTHB Waivers: 7.375% (assumes 1 point paid by borrower)**
Today’s interest rate WITH Fannie’s New FTHB Waivers: 5.875% (assumes 1 point paid by borrower)
**This scenario is oversimplified for the purpose of this blog, as there would likely be “high-cost mortgage issues” that would make this financing scenario even more difficult for a borrower of this nature prior to Fannie’s October waivers.
Please note that these rates are not as low as our jumbo rates, but no jumbo lender would go near a 5% down condo purchase by a borrower with a 675 FICO.
Jay Voorhees
Founder | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
