Is there really a NEW unfair Mortgage Tax? Do you Really Need an Agent when Buying New Construction?
-This is a transcript from Go Gaddis Radio to listen to the episode click here-> https://on.soundcloud.com/MNmZV
Welcome back to Go Gaddis Real Estate Radio right here on AM nine 20. This is Cleve Gaddis in this segment. Is there really a new unfair, in my opinion, mortgage tax? Is it possible that people with better credit are gonna pay a higher interest rate in many cases than people with lower credit scores? I think the answer to that might be yes.
Also, do you really need an agent when buying new construction? My name is Cleve Gaddis. You are listening to Go Gaddis Real Estate Radio, and I'm so glad you're here. Our goal is to help listeners go from real estate novices to experts. So home selling and buying can be done with total confidence and without all the worry that is so typical with life's biggest investments.
We don't want you to learn anything at closing or after. That you should have learned before. It's hard enough to make the right decisions based on things that cost so much money. And the reality is everybody needs good representation, uh, in buying, selling, and buying, or selling a home. For those of you who are listening who have had experiences with real estate agents in the past, I want to ask you, what percentage of the time did you feel like that real estate agent absolutely, positively had your best interest at heart?
I'm not trying to badmouth real estate agents. There are a lot of really fantastic real estate professionals all throughout. The United States and Canada. But the reality is, is that, uh, being very detailed and, uh, really bringing value and bringing service to the table, I would say that that's more the exception than it is the rule.
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We would love for you to be a podcast subscriber. We would absolutely, positively love it. Is there really a new unfair mortgage tax on those with high credit scores seemingly overnight? The internet went crazy, in my opinion, with news regarding this new unfair tax on mortgage borrowers with high credit scores.
Some has gone so far. Some have gone so far as to suggest that somebody could intentionally. Lower their credit score in order to get a better interest rate first and most importantly, uh, you will absolutely not get a better deal on a mortgage rate if your credit score is lower. Um, even if your nephew just texted you a screenshot of a news headline saying, six 20 FCO score gets a 1.75% discount fee, for example, and a seven 40 FCO score.
Uh, has to pay a 1% fee. This all has to do with changes to loan level pricing adjustments, or what Fannie Mae and Freddie Mac call ll ps, which are imposed again by Fannie Mae and Freddie Mackley government agencies. Those are those two entities that guarantee the vast majority of new mortgages in the United States.
LPAs are really based on loan features, such as your credit score and the loan to value ratio. Among other things. They've been changed several times over the years and. And, and a fairly substantial change was announced at the end of January this year that I believe goes into, went into effect on May the fourth.
But people are confused because they don't understand how delivery dates work, changes that impact the fees and guidelines are almost always implemented based on the date the loan in question is delivered to Fannie May or Freddie Mac. Delivery in this context typically occurs within a matter of weeks after the loan is closed, so consider that a loan.
A, a lo, a closed loan has often been quoted and locked for more than three weeks. Call it a month to be safe. Since these changes going to effect on loans delivered after May. The first, I said fourth May, the first lenders began to implement them weeks ago. Let's take a look and, and see what it looks like.
By the way, this article says there is no scenario where someone with a lower credit. Will have a lower fee. And the reality is that I don't necessarily understand these charts. Um, we've got some color coded charts that show, uh, additional charges for mortgages and discounts for mortgages. And, uh, all of the additional charges show up in red and the discounts show up in green, which makes sense.
Red, bad, green. Good. And when I look at these numbers, it seems like there is going to be, uh, some additional. Interest rates paid by people with better credit scores. So if you had, let's just take a look here. If we look at one of the, the charts, and this is for purchases outright, these are for people who are purchasing homes.
They've got charts for cash out, refi, refis, no cash out refis. Uh, they've got charts for, uh, you know, purchases changed from, from prior interest rates. But the purchases outright, if you put. If you have between 75 and 80% ltv, meaning you put 20% down if you have a, it is very interesting. So in this particular case, if you had a seven 40 to seven 60 credit score, you would have a.
An additional charge or a discount or an additional 0.875% added. And I'm not saying that's the additional interest rate, it's just the additional charge, uh, by Fannie Mae or discount. And if you had less than a seven 40 score, you would face an additional 3.75% charge. This is really amazing. I looked at some numbers earlier today, and I'm gonna be honest with you when I consider all of these numbers, I am confused.
Long story short, Fannie Mae and Freddie Mac have an obligation and a mission to promote affordable home ownership. They are in. They exist because the US government wants to promote and support home ownership. It does seem to me, That if you have a little higher credit score than it is possible that you could pay a little bit of a higher interest rate.
Give you an example here. If you have a score of six 40. You would be paying more based on my examples than if you had a seven 40 using an 80% loan to value ratio. As an example, your L P A at six 40 is 2.25% versus 0.875, which we talked about for a seven 40 score. That's a difference of 1.35% or just over $4,000.
Annually on a $300,000 mortgage. Well, this is almost half the previous difference, and that's certainly a big change. So I'm suggesting that if you are thinking about getting a mortgage anytime in the near future, you talk to your lender and you get some clarification on exactly what the, this new pricing schedule means for you.
Have you ever been house hunting in a new home subdivision and felt a bit of pressure from the sales staff? Were you worried that you didn't know what to do or what to say or how to respond and that maybe nobody was looking out for your best interest? Tammy Slay, who many of you here on the radio with me?
Uh, occasionally in Atlanta. The last two weeks she was on the show with me as a real estate broker in Dallas, Texas. Her son is trying to buy a house. And the agent in the subdivision, and I believe it was a Dr. Horton subdivision, really seemed to be trying to strong arm her son and his wife in signing paperwork when they really weren't ready.
They really didn't know if they could get their financing approved, and I'm gonna tell you right now, Tammy was not having any of that. She does not want her son and daughter-in-law to get into a position that they wished they were not in. We got a listener question. From Jordan in Cumming says, we're looking to build an existing new cons in an existing new construction neighborhood.
There are agents on duty who seem to hound dust. Do we need to have our own agent? And in many cases, those subdivision agents will tell you that you really don't need to have your own agent. I disagree with that. There are several reasons I think you need to have representation when you buy new construction.
Uh, the subdivision agents might tell you that the cost of the home is not going to be negotiated down. Or is not going to. You can save money if you don't have an agent, but I want you to think about that for a second. If they reduce the price of the home because you did not have an agent, then that affects their comparables, which reduces the value of all homes that are sold subsequently.
So they don't want to drop the price on homes for any reason, and I don't necessarily blame them. A listing agent represents the interest of the builder only, and not you. The purchase agreement is written by the builder's lawyers to protect the builder and not you. The builder pays the buyer agent's fee as it's currently structured in the state of Georgia, meaning the builder's got to pay the agent who represents you in most cases.
Remember, builders don't want to discount the price of a home, so they don't want to give you a discount if you don't have representation. The builder's agent generally appreciates having somebody involved on the buyer side who understands new construction, uh, and I'm gonna say be more cooperative as a result.
And I don't mean cooperative in terms of letting them get by with do without doing something they should. I just mean cooperative in terms of easy to deal with. I have had some of the most pleasant relationships with builders, representatives over the years. As I was very politely, very professionally holding the builder's feet to the fire to make sure that every single thing that should be done for the buyer was done.
Buyer's agents understand which upgrades add resale value and which don't, so they can help you pick out stuff. Uh, if you need help understanding how the inspection or repair process works or some advice on that, buyer's agents can help you with that. They're also aware, most buyer's agents are of other new home subdivisions in the area, and maybe there's a better situation for you that you don't even know about.
And buyer's agent generally can negotiate the best possible deal based on potential upgrades, financing, incentives, whatever it is that you decide that is important to you. So my recommendation is that if you are considering a new home construction, that everybody needs a guide for that. And we'd love for Modern Traditions Realty Group to be that guide for you.
You can go to go gadi radio.com, or you can call us at (770) 497-0000. We're gonna take a quick break in our neighborhood spotlight. Glen Abbey in Alpharetta is being featured. And what are the regrets from first time home sellers? And have you missed the spring selling window? Stick with us. We'll be back.
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