SOUTHFIELD, Mich. (WXYZ) — If you are first time home buyer or a homeowner looking to refinance with good credit, then get ready to dig deeper into your pockets.
“I just give God thanks and glory that I'm doing what I'm doing when it's happening,” said Linda Jones, homeowner.
73-year-old Linda Jones just sold her home in Ferndale for $200,000 to move into a $140,000 house in Warren.
"I'm downsizing hoping it's going to help me in every way,” Jones said.
Linda says she is happy because her mortgage was processed before May 1. That's when the new rule by the Federal Housing Finance Agency comes into effect.
In simple terms, folks with good credit will pay a higher rate, while people with average credit will get a competitive rate.
To understand the why, what, and how, 7 Action News met up with Melinda Wilner who works for America's top lender, United Wholesale Mortgage.
“The purpose was to help make housing more affordable for more people. So, it was kind of in the lower lines of credit scare making it cheaper for them than what it was before, and to subsidize or compensate that made it expensive for higher for credit scores,” said Melinda Wilner, COO with UWM.
“It’s really an adjustment to the loan amount based on the loan amount. So sometimes, that amount is built into the rate. I would often say it's built into the rate. And sometimes you can also pay it as a fee,” Wilner said.
For example, if you are buying a home for $100,000 and have a credit score of 720, your mortgage fee would go up from $1000 to $1250. But if you have a lower credit score, your mortgage will go down to $750.
“It is across the board. It’s not specific to just first time home buyers, or existing. I want to say it's a little bit heavier on the cash-out refinance side of things too,” Wilner said.
Last year, United Wholesale Mortgage processed nearly a $128 billion dollars in home loans.
Melinda says the mortgage industry goes through a lot changes. Hence, the latest rule won't be the last.
Meanwhile, a metro Detroit realtor of eight years, Erik Jurvis, is excited about the change because most of his clientele will benefit.
“The idea of this program is to benefit those first time home buyers, people who have been trying to move out of mom's basement, or who have lost their homes during the pandemic, those who have been trying to get back into the housing market,” said Erik Jurvis, real estate agent with RE/MAX Nexus.
Eric says every dollar counts for folks with average credit or first time home buyers who don't have established credit.
“Someone who is buying a $500,000 home, that fee is not going to make a difference, but again $50 a month for a person who is just making it, that makes a huge difference,” said Jurvis.
Keep in mind there is no one-size-fits-all when it comes to mortgages.
Melinda's advice for home buyers is to go through a broker, as they can get you the best possible rate from various lenders.
