New fee for residential conventional mortgages

The Federal Housing Finance Agency just rolled out August 12th, 2020 new change to conventional mortgage refinances. Here’s what you need to know going forward…

Fannie Mae and Freddie Mac are now assessing  50 basis points loan level pricing adjustment on all refinances for conventional loans going forward.

For example, a mortgage that was offered at 2.5% at no points now is at 2.5% with half a point discount point. That half-point discount point is directly tied to the amount financed so on a $300,000 loan there is now another $1,500 for example.

On average for most mortgages in America, this is going to result in thousands of dollars of extra fees to refinance. So your options going forward are the lender covers it, you lock with a quality lender who can help appropriately time market conditions to offset the pricing, or you end up having to pay it as a byproduct of refinancing your home. This may be an indicator interest rates is poised to rise in the future, the other possibility, the markets are recognizing these rates are going to be here for a while as the economy remains in an economic lull which would further support them having to increase their margins.

As a reminder, low-interest rates in the mortgage space are brought on by negative economic information. As long as there are doom and gloom in the economy, this rate environment continues it’s more than likely these rates or some version of these rates in the neighborhood of sub 3.p% on a 30-year mortgage will probably be here for a while. This should be something to think about if you are deciding whether to proceed and move forward with a refinance offer. An experienced lender can walk you through what is happening in the market, and give you options for helping you maximize the velocity of your money in regards to offsetting this added refinance cost.

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