Mortgage Fees Are On The Way Up

Mortgages & Refinancing

Mortgage Fees Are On The Way Up

Lenders want a plumper cushion against the risk of defaults.

Mortgages purchased from banks and brokers by Fannie Mae and Freddie Mac are getting a little more expensive -- again. Starting in April, the latest in a series of fee adjustments -- aimed at accounting for default risks -- will begin to affect a wide swath of home buyers and mortgage refinancers.

Fannie Mae and Freddie Mac purchase loans of up to $417,000 -- and up to $625,000 in pricey markets. But gone are some discounts that borrowers once enjoyed, such as the quarter-point break for those who have credit scores of 720 or above and have less than 15% equity in their homes (such loans are considered safer because borrowers typically pay insurance). For the first time, anyone buying or refinancing a condo with less than 25% down will pay 0.75% of the loan amount, unless the term is 15 years or less.

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Borrowers with less than 30% equity will pay more if their credit score is below 700; borrowers with less than 15% equity will pay more even if their credit is flawless.

"Not so long ago, a credit score of 680 was considered great -- you got all the good deals," says Mike Anderson, president of Essential Mortgage, in New Orleans. You can also expect a bigger hit if you've got a home-equity loan, or if you take cash out when you refinance.


Under Fannie Mae's new rubric, someone with a $250,000, 30-year loan, with 15% equity and a credit score of 699, will pay $2,500 more for a cash-out refinance than they would have before April. "Rates are so low that people want to lower their payment by $200 or $300," says Anderson. "But all these fees make it cost-prohibitive."