New mortgage roadblocks on horizon

How fees, Dodd-Frank bill, appraisals can impact your purchase

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Going through the mortgage approval process hasn’t been easy these last few years, due to lender tightening and underwriting scrutiny. Aside from requiring mounds of documentation, large down payments and sterling credit scores, conforming lenders now want more of the buyer’s money.

Even though interest rates are low, the borrower’s cost of financing has increased recently due to new Fannie Mae and Freddie Mac add-ons to cover the cost of perceived risk factors.

For example, well-qualified buyers with credit scores above 800 and a 20 percent cash down payment are now charged an extra 1/4 percent of the loan amount. So if you’re applying for a $500,000 mortgage, you’ll be charged an extra $1,250 at closing. The extra 1/4 percent is waived if the borrower puts 25 percent cash down.

The extra fee is higher for buyers with lower credit scores, lower cash downs and other perceived risks like an interest-only loan.

On April 1, the Dodd-Frank bill regarding mortgage compliance requirements will take effect. Part of Dodd-Frank deals with how loan originators (mortgage brokers or loan agents) are compensated.