More Costs for Mortgages - Freddie Mac raises home loan delivery fees

Freddie Mac (FHLMC) raised their Post-Settlement Delivery Fees today for credit scores under 680 and LTVs over 70%. Fannie Mae (FNMC) will do the same thing shortly. What the heck are Post-Settlement Delivery Fees and how will they affect your ability to get a mortgage to buy or refinance real estate?

Post-Settlement Delivery Fees are fees that are charged based on the risk of a loan. Lenders and brokers are charged these fees when they sell your loan to Freddie Mac or Fannie Mae, but because they are the industry standard they're pretty much with any lender.

Typically your lender or broker shows these fees as 'discount' points, or they can raise your interest rate to cover the fees. It's called 'risk-based pricing', because they're trying to offset their risk by collecting interest up front.

You already had fees like these for cash-out refinances...half of a point for 70-80% loan-to-value and three-quarters of a point for 80.01-90% LTV. These fees are in addition to those and apply to purchases as well.

Let me illustrate how these new charges could affect your loan.

Let's say that you were buying a home in Hemet.

• Your credit score is 670
• The sale price is $250,000
• You have 20% down
• Your loan amount is $200,000.

Let's say that you were getting an interest rate of 6.125% on a 30-yr fixed. Yesterday you would pay 1 origination point, or 1% of the loan amount ($2,000) in fees or pre-paid finance charges.

Today, you would have to pay an additional .75% in discount points to get the same rate, or an additional $1500 in pre-paid finance fees.

OR, to avoid the extra fees, you could take a higher interest rate: about .25% higher, or 6.375%.

As your credit score drops lower, or you put less down, the fees increase to as much as 2% of your loan amount. In this case, that's an additional $4,000 or raising the interest rate by about .75%.

There is evidence that mortgage interest rates may drop in the near future, but the extra fees that Freddie and Fannie charge will be the industry standard and will more than offset the change.

How can you avoid these changes?

• Keep your credit score over 680. Click HERE for information to fix your credit.
• Or put 30% down. If you're refinancing, don't pull out more than 30% of your equity unless it's worth the cost for your situation.

Joey Aszterbaum is the Hemet Home Loan Guy and a member of the Active Rain social network of real estate professionals. To buy or refinance real estate in Hemet, Riverside County or California, click HERE.