What is the FHFA First-Time Homebuyers Rate Discount?

Last year the Federal Housing Finance Agency (FHFA) announced changes to Fannie Mae and Freddie Mac’s pricing structure to reduce fees for certain homebuyers and mortgage products.  

The intent of these changes is to help more Americans become first-time homeowners by removing financial barriers that may have previously prevented them from buying a home. 

The fee reductions, in the form of loan-level pricing adjustments (LLPAs), apply to eligible buyers who use a conventional loan to purchase their first home. 

Learn about how much you can expect to save with this change and how to find out if you can qualify below. 

What is the FHFA First-Time Homebuyer Mortgage Rate Discount? 

The FHFA first-time homebuyer rate discount is a government-sponsored home affordability program that launched in late 2022. The program reduces rate add-ons for eligible first-time buyers, saving up to 1.75% on the interest rate of their loan. 

Who Qualifies for this Rate Discount Program? 

To take advantage of these reduced-rate add-ons,  you must: 

• Be a first-time homebuyer 
• Purchase the home as your primary residence 
• Move in within 60 days of the closing on the loan 
• Meet low-to-moderate household income requirements 
• Utilize conventional financing options 

It’s important to note that the FHFA considers you a first-time buyer if you have not owned a home in the last three years. 

To qualify for the low-to-moderate household income as outlined above, your income must fall below the area median income based on the address of the property you’re purchasing. You can use the Area Median Income Lookup Tool to find the limit that applies to you. 

How Does the FHFA Rate Discount Work? 

This program, targeted at helping low-to-moderate income borrowers, waives loan-level pricing adjustments (LLPAs) for eligible first-time buyers. 

LLPAs are small interest rate modifications that are factored in based on an applicant’s credit profile and lending risk assessments. These LLPAs are incorporated into any mortgage quote that you might receive when comparing loan options for conventional financing. 

These are common factors that can cause LLPAs to be triggered and increase the rate you’re offered for a conventional loan: 

• Your credit score 
• Your down payment amount 
• Adjustable-rate vs. fixed-rate options 
• Whether or not the purchase is for a primary residence 
• Whether the property is single or multiple units 
• Whether or not the property is a condo 
• Whether or not the property is a manufactured home 
• Whether or not there is a subordinate lien on the property 

How Much Can This Program Save a First-Time Homebuyer? 

Eliminating or greatly reducing the LLPAs you’re subjected to can have a large impact on the interest rate that you receive. Although a reduced interest rate of up to 1.75% lower may not seem like a lot, that can equate to big savings over the lifetime of your loan.

With these savings for first-time homebuyers, it’s an exciting time to be in the market to purchase your first home. Although the real estate market has been volatile over the past few years, there are great programs available to help first-time buyers overcome the obstacles and challenges that might otherwise keep you from achieving your homeownership goals. 

The best way to set yourself up for success as a first-time buyer is to get a free consultation from an expert loan officer who has your best interests in mind.  

Get in touch with our team today for a free consultation to review your personal financial situation and discuss the right path to homeownership for you.