Low Credit Score Means Additional Mortgage Fees for Home Buyers
But recent changes in the mortgage industry have produced another benefit to having good credit -- it could help you save money in mortgage fees.
According to a recent story at Market Watch, a low credit score could mean you have to pay higher fees in order to close your mortgage loan. When you combine this with the higher interest rates people with low credit scores typically pay, you have a tough situation for home buying.
This change partly comes from new standards set by Fannie Mae and Freddie Mac, companies within the secondary mortgage market that buy loans from primary lenders. Fannie and Freddie have imposed additional lending fees for consumers with low credit scores under a certain mark, and this in turn gets passed on to the consumer through the primary lender.
If you'd like to learn more about the fees and how they are applied, do an Internet search for "Loan Level Price Adjustments." If you really want to get into the weeds on this subject, you can check out the pricing matrix on Fannie Mae's website.
How to Improve a Low Score
In theory, the solution to all of this is simple. Improve your low credit score, and you'll have an easier time getting a home loan with a decent interest rate. You'll also avoid the fees associated with bad credit. In practice, however, many consumers have no idea where to begin.
This is where we direct you to another section of the Home Buying Institute. The Consumer Credit Help blog has more than 150 lessons designed to help you improve a low credit score. You can also find some excellent advice through the links provided below.
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Labels: Credit scores
posted by Brandon at
10:58 AM
