Biden Administration Raises Mortgage Payments for Borrowers with Good Credit
In April 2023, social media and articles spread rumors that US President Joe Biden had made changes to the amounts home buyers would have to pay at closing. The Biden administration is raising mortgage payments for borrowers with good credit and high down payments starting May 1 to support borrowers with low credit scores and low down payments. Rumors that US President Joe Biden promoted or introduced these changes have not been supported by evidence.
The Federal Housing Finance Agency (FHFA) has made changes to the fees that borrowers pay when closing a mortgage. These fees, called "advance fees," are intended to cover the lender's costs. These include the earnest money deposit, inspection fee and appraisal fee. The changes, which will come into force on May 1, 2023, will affect various categories of borrowers. The goal of the changes made by FHFA is to provide more equitable access to housing for people from different backgrounds. Fannie Mae and Freddie Mac also support these changes to ensure affordable housing.
Some experts disagree with claims that the changes penalize people with good credit, explaining that this argument ignores the fact that borrowers who put less than 20% down must purchase mortgage insurance, which is also an additional cost. FHFA explained that the new fee structure offers lower payments for borrowers with low credit scores to make mortgages more affordable and does not incentivize borrowers to make smaller down payments to receive lower fees.
In January 2023, the Federal Home Finance Agency (FHFA) made changes to its mortgage fee structure. The new rules will apply to home loans with terms longer than 15 years and break down fees not only by credit score, but also by down payment category, fee percentage and property type. The goal of the changes is to provide fairer and more sustainable access to housing for people from different social backgrounds.
In October, down payments were waived for first home buyers whose incomes are at or below 100% of the median income (AMI) in most of the United States and below 120% of the AMI in high-cost areas. AMI is the median income point for a particular area and is determined annually by the Department of Housing and Urban Development (HUD). If a buyer's income is below the appropriate AMI level for their area, they would not have to pay down payments when purchasing a home. This change is aimed at helping low-income people afford housing. Even though homeownership rates are rising in the United States, access to affordable housing remains a challenge for some people. It's important to note that these changes have drawn criticism from some Republicans who believe they set a negative precedent and penalize financially cautious Americans.
Author: Elina Linderman
