With the changes that Fannie Mae and Freddie Mac announced in July, we knew there would be changes coming to MN Housing loans – and Dakota County CDA loans. Those changes have been announced and here are the updates.
MN Housing changes affect just the conventional loans. FHAÂ and VA will not have any changes. Here are the changes for MN Housing:
- Pricing changes effective September 5, 2019:
- Different pricing for Fannie Mae borrowers at or below 80% Area Median Income (AMI) and Fannie Mae borrowers over 80% AMI. The AMI for the Minneapolis/St Paul metro area is $79,440.
- Changes to mortgage insurance rates for Fannie Mae borrowers above 80% AMI.
- Fannie Mae borrowers with initial Desktop Underwriter run dates on or after September 5 will no longer be eligible for charter-rate mortgage insurance. In the past, everyone was eligible for lower mortgage insurance rates (18% coverage), now those over 80% AMI will get regular MI pricing. That means an increase from 18% coverage for 3% down to 35%. As an example if your loan amount is $200,000 and your credit score is 720, the MI will go from about $101/mo to $145/mo if you are over the 80% AMI.
- Product/options availability
- Fannie Mae HFA Preferred Risk Sharing loans will no longer be available to borrowers over 80% AMI.
- Upfront Paid Mortgage Insurance (UPMI) will no longer be available to Fannie Mae borrowers above 80% AMI (effective for new locks in the Minnesota Housing loan commitment system on or after September 5).
- Freddie Mac has not announced any changes for HFA loans. This means if your loan is run through Freddie Mac instead of Fannie Mae, you will get the lower interest rates and mortgage insurance rates. My suggestion is to talk to your loan officer and make sure they are using Freddie Mac underwriting programs. I also expect Freddie Mac will update their guidelines to match Fannie Mae, but until they do, it’s a great way to save some money!
Dakota County CDA loans also have some changes. The changes with CDA affect all loans, not just conventional loans.
- One major change that affects all CDA loans is a 1% origination charge. In the past, the origination fee was .50%, now it will be 1% for all loans.
- CDA will show three interest rates – FHA, conventional loans under 80% AMI and conventional loans over 80%AMI.
- Mortgage insurance will also change for conventional loans. If your income is at or under 80% AMI, you can get the charter (or lower) mortgage insurance. If you are over 80% AMI, you will have regular pricing for MI, not the reduced rate as you did in the past.
- CDA requires all loans to be underwritten to Fannie Mae guidelines. So there will not be an option to use Freddie Mac with Conventional loans.
Both programs are still great- both still allow you to use down payment assistance to purchase your first home. With MN Housing you can also use down payment assistance if you need to when you are purchasing your next home. Talk to your loan officer if you need help with the down payment.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
