The idea behind the change is to give people who have had a hard time getting credit a chance to own a home for less, which will be welcome news for those trying to buy a home in New Jersey, an increasingly difficult housing market.
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"Borrowers with a higher credit score are going to pay almost double the same fees they would've paid before yesterday, May 1, and borrowers with lower credit scores are going to pay about half," Paul Oster said.
Extra Time: Federal rule change to raise mortgage fees based on credit score
Oster, founder and CEO of Better Qualified, is talking about what's called loan level price adjustments.
In a nutshell, the Biden administration made this change to the mortgage lending industry to give more people the opportunity to qualify for a mortgage. Oster says this program spells trouble.
Higher fees for borrowers with good credit? Inside Biden's new rules on mortgage fees
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"The American Dream becomes a nightmare very quickly if we set these people up for failure," Oster said. "We want to help out people with lower credit scores buy a house but we have to make sure they have the ability to repay the loan ... we want to make sure that they can actually afford the home."
It may also make states like New Jersey even more competitive for home buyers. Compass Real Estate realtor Sean Quinn told Eyewitness News reporter Toni Yates that there are fewer houses being sold because homeowners who refinanced and now have lower interest rates aren't jumping to sell their homes.
"They're all saying, even if I want to move, where would I go," Quinn said. "Not to mention they can work from home. They are more appreciative about their homes more than they used to be."
On top of that, Oster says a lot of people are stalling any plans on buying or selling because of the changes.
"People are now becoming paralyzed by fear and uncertainty, 'you know what, maybe I'll wait a little while, lets figure out what exactly is going on,'" Oster said.
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Oster says always check your credit. Keep it as high as possible regardless. If you are looking to buy right now, Quinn says FHA approved loans, those backed by the government, are fine but in a hot market, sellers may still lean in favor of those with conventional loans.
"So, an example would be an FHA buyer goes in and says I want that house, makes a very high offer to get the house," Quinn said. "Now the house doesn't appraise let's say by $50,000, who makes up that difference? In this market, the seller isn't going to make up that difference, they are going to ask the buyer to cover that cost, and so that seller is going to ask themselves will someone who has an FHA loan have the extra cash to make up an appraisal difference if there is one?"
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