News Update: Due to the new law from the Biden administration, people with good credit will soon pay higher prices when buying homes, while those with bad credit will receive lower rates.
This is a loan purchased on or after May 1st.
For Home Buyers – Good Credit Score Is Not Good Now
A mortgage lender Eyewitness News spoke to said the law is meant to help people with bad credit buy a home they wouldn’t normally be able to afford, but it comes at the expense of responsible people and Works hard for years to get a high credit score.
“It looks like it has been reversed,” said Nik Boone, CEO of Ascend Real Estate Property Management.
“Everybody tries their whole life to get a good credit score so they can get a lower interest rate from the bank, pay less fees, and everything will change on May 1.”
Under the new rules, high-credit buyers with scores between 680 and more than 780 will see mortgage rates rise. Homebuyers paying 15-20% in advance are affected by the highest fees.
Experts calculate that someone with a $400,000 loan at 6% interest and a good credit score will have to pay an extra $40 per month or $14,400 more on a 30-year mortgage.
But what impact will this have on the housing market?
“We’re in a low-income area by California terms, so that could encourage people with lower credit scores who don’t have a lot of equity to buy a home,” said Nik Boone.
Affect on the Industry
An expert, mortgage adviser said there’s not enough supply to meet demand and that’s not going to help.
“There are about 633 people in the County for every home for sale,” “That won’t help.”
He says it’s also bad for the industry.
“This might seem positive at first, but over time it will turn negative in the industry, as borrowers with higher credit scores will become even more ominous,”.
Scott Hanson, president and chief executive officer of Level Financial, wants to dispel misconceptions about this new law.
“People with good credit will pay a little more than they paid, and people with lower credit scores will pay less than they paid but still benefit from having a good credit score,” says Hanson.
Make good use of it and deposit as much money as possible at the best interest rate.
That could mean the difference between someone with good credit paying a few hundred dollars in total, and someone with bad credit saving a few thousand dollars in total, he said.
While the rules officially went into effect on May 1, experts say, most lenders made these adjustments months in advance to keep up with the changes, and most, experts say. Homebuyers are already feeling the impact.
(News Help from Online Sources)
