Mortgage Rate Changes Based on Credit Score April 24, 2023

During the past week the news organizations are alive with reports that there is a “new tax” that gives borrowers with lower credit scores a better interest rate than those with higher credit scores.  This is categorically false.  There are changes.  But in no scenario will a borrower with a 640 credit score get a better mortgage interest rate than a borrower with a 740 credit score.  So what is the truth?

The truth is that Fannie Mae and Freddie Mac did change their fee structure so that borrowers with lower credit scores will get a better mortgage interest rate than under their previous fee structure.  And borrowers with higher credit scores will get a slightly higher interest rate than they did under the previous fee structure.  But the higher credit score borrower will ALWAYS get a better rate than the lower credit score borrower.