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Mortgage fee structure change means different things for different home buyers

Last week, the Federal Government changed the way a mortgage fee is applied to try and get more people to buy homes in the slowing housing market.

BOISE, Idaho — Housing affordability in our community could be the biggest challenge of our time.

With all the recent growth Idaho has seen, home values have continued to spike, meaning a lot of folks who are renting cannot afford to actually buy a home. But help could be on the way, especially for folks with not-so-good credit; for those with good credit, however, things could get a little tougher.

In an attempt to try and curb inflation, the Federal Government hiked interest rates again last week, but they also did something to try and get more people to buy homes in the slowing housing market; the government changed the way a mortgage fee is applied.

This particular fee, known as loan-level pricing adjustment, is on conventional mortgages that are backed by Fannie Mae or Freddie Mac. It is the government's way of raising prices for "riskier" borrowers without putting a penalty on "safer" ones.

The change to the mortgage fee, which took effect eight days ago, means that people with higher credit scores will now pay more of this fee than they had before, and those with lower credit scores will actually have that fee go down.

The Federal Housing Finance Agency believes this is a step toward more even access to homeownership, and real estate experts agree it could help.

"I don't think it's going to disrupt the mortgage market tremendously for the high-rated borrowers," David Sacco, a University of New Haven business practitioner in residence, said. "And if it helps a low rated borrowers, you know, access housing, it probably is not a bad thing."

Take for example someone buying a $400,000 home with 25 percent down: According to NBC News, if they had a 750 credit score, their fee would go from $750 to a little more than $1,125. While someone with a 650 credit score would see their fee cut, almost in half, from $8,250 to $4,500, although, their fee overall is still four times that of someone with a higher credit score.

Add that to the still high home prices and mortgage rates and experts report, it's getting more expensive for folks with bad to fair credit to buy a home, regardless of this fee change.

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