Homebuyers Rejoice as FHFA Rescinds Upfront Fees Based on Debt-to-Income Ratios for Loans Acquired by Fannie Mae and Freddie Mac
"A Win for Homebuyers as FHFA Cancels Upfront Fees Based on DTI Ratios"
Big news for homebuyers! The Federal Housing Finance Agency (FHFA) recently announced that it has rescinded the upfront fees based on borrowers’ debt-to-income (DTI) ratios for loans acquired by Fannie Mae and Freddie Mac. This move cancels the fee that Fannie Mae and Freddie Mac would have imposed on certain loans for which the borrower’s total debt exceeded 40%.
So what does this mean for homebuyers? Well, if you have a DTI ratio above 40%, you’ll no longer have to pay an additional 0.375% fee on your home loan that Fannie Mae and Freddie Mac would acquire. This fee would have translated into a significant upfront cost for borrowers, or an increase in their monthly mortgage payments if they chose to pay it through a higher interest rate.
But what exactly is a DTI ratio? It’s the portion of a borrower’s pretax monthly income spent on paying recurring debts, including mortgages, rent, and credit card balances. A high DTI ratio can indicate that a borrower may have difficulty repaying their debts, which is why lenders often use it as a factor when evaluating mortgage applications.
