Fannie Mae and Freddie Mac - April Fools

It's a bit hard to believe, but in the midst of one of the worst housing crises to hit our generation, Fannie Mae and Freddie Mac have decided to make it even more difficult for home buyers to get financing come April 1. And some of the major lenders are already tacking on the significantly higher fees.

Under Fannie & Freddie’s new guidelines, even buyers who thought that their FICO score would get them a favorable interest rate will be charged more unless they can come up with a downpayment of more than 30% of the purchase price. A buyer with a FICO score of 699, even with a 25% down payment, will get now get hit with a 1.5% delivery fee. A buyer with a FICO score between 700 and 720 will have to pay a 3/4% delivery fee. Even someone with a 739 FICO score, always considered “A” credit, will get hit with a 1/4% delivery fee. To put this in perspective, if you're paying a 1% delivery fee on a $500,000 mortgage, that equates to bringing $5,000 more to the table at close of escrow.

Buyers of condominiums who can't come up with a 25% down payment will have a 3/4% add-on penalty regardless of how good their credit is simply because it is not a detached single family residence.

It looks like the only way you can avoid these penalties is to get an FHA loan, which may or may not result in a higher interest rate. Federal Housing Administration mortgages allow down payments as low as 3.5%, and credit scores are not as critical as those required by Fannie Mae and Freddie Mac. More on some positive changes in FHa loans in my next post.