In an effort to offer legitimate assistance to first-time homebuyers in a higher rate environment, Fannie Mae announced new updates in Lender Letter 2022-05:

“To promote sustainable and equitable access to affordable housing, on Oct. 24, 2022, FHFA announced targeted changes to the GSEs’ pricing by eliminating upfront fees for certain borrowers and affordable mortgage products. FHFA also announced targeted increases to the upfront fees for some cash-out refinance loans.” 

Freddie Mac issued a similar statement in Bulletin 2022-22, confirming participation in the elimination update. 

These ‘upfront fees’ cover a variety of things, including credit scores, property types, down payment percentages, as well as loan-to-value ratios, and can affect rates by around 1.5%. 

Rates are traditionally increased to cover these fees, so eliminating them will lead to a lower rate for qualifying borrowers. 

Qualifying for Fee Eliminations and Lower Rates

Borrowers must meet the following qualifications: 

• Must be a first-time homebuyer, which is defined as someone who has not owned a home in the last three years. 
• Income must be less than the Area Median Income (AMI) in low-cost areas. Income must be less than 120% of AMI for high-cost areas. 
• Borrowers can determine the AMI for their location with Fannie Mae’s AMI Lookup Tool. 
• Must be a purchase loan, cannot be for a refinance. 
• Primary residences only. Investment properties and second homes do not qualify. 

Key Takeaways

For those who qualify, this program offers tangible benefits to first-time buyers navigating the current market. This program is not guaranteed to last forever and may disappear once the spring market heats up- borrowers should act now before losing out on any benefits. Call your trusted loan officer today to determine the best strategy for your financial future.