If you’ve struggled to get approved for a home loan because of your credit score, rising mortgage rates, or increasing home prices, good news is on the way! The Federal Housing Finance Agency (FHFA) is implementing ways to provide relief to first-time home buyers and low- and moderate-income buyers so they can finally buy their first home.
Changes to Fannie Mae and Freddie Mac’s pricing structure will likely benefit 1 in 5 people who plan to use these government-backed loans to buy a home.
The FHFA is finding ways to help more first-time homebuyers obtain a mortgage by requiring lenders who do business with Fannie Mae and Freddie Mac to look at two credit scores. The FICO 10T and Vantage Score 4.0 are considered more inclusive and will replace the traditional FICO score. FHFA said the new credit score system will be a “multiyear” process.
Thanks to the new credit scoring system, past rent and utility payments will be factored into your score, improving your chances of getting approved for a home loan. The new credit model will also make a difference in the lives of consumers with unpaid medical debt, as the debt will not impact their credit score as much as it has in the past.
- Eliminate upfront fees
- “Promote sustainable and equitable access to affordable housing”
- Less credit score impact on individuals with unpaid medical debt
Also, fees associated with Fannie and Freddie mortgages will be reduced “as soon as possible,” according to the FHFA. Upfront fees on mortgages will be eliminated for certain buyers. Upfront fees are known as delivery fees or loan-level adjustments (LLPAs) and can cost homebuyers thousands of dollars, especially if you have a low credit score. Eliminating these fees will help underserved communities, first-time homebuyers, and low-income buyers and “promote sustainable and equitable access to affordable housing” (Sandra Thompson, FHFA Agency Director). Elimination of upfront fees affects the following:
- HomeReady and Home Possible affordable mortgage programs
- HFA Preferred and HFA Advantage loans
- Single-family loans associated with the Duty to Serve program
- First-time home buyers whose income is < 100% of the area median income (AMI)
Conclusion
Being able to afford your first home has been a challenge in today’s housing market, but changes to Fannie and Freddie’s pricing structure and credit score requirements are about to change that. Changes will help first-time homebuyers, low- and moderate-income home buyers, and minority buyers afford a Fannie or Freddie home loan with fewer upfront costs. This is a massive change in the world of home buying and financing! We hope you’ll find it easier to qualify for a mortgage and buy your first home, thanks to these FHFA changes.
Learn more about financing the purchase of a new home:
