If you’ve never owned a house, or haven’t owned one in three years, a new Federal Housing Finance Agency (FHFA) mortgage discount program, launched in late December of 2022, can cut up to 1.75 percent from your mortgage rate.
You can qualify for this discount program if you are buying your first home (or a home for the first time in three years) for your main residence and you are using a conventional mortgage. There is also an income requirement that you must earn less than the median income for your area.
The best mortgage rate discount of 1.75 percent goes to buyers with below-average credit scores who can make a 3 percent down payment on a fixed rate mortgage. The higher the credit score, the lower the discount. So a buyer with a 620 credit score and 3 percent down gets a 1.75 percent discount. But a buyer with a 760 credit score and 3 to 20 percent down gets a .25 rate discount.
The income requirements are based on the mortgage giant Fannie Mae’s median income for the area, which isn’t necessarily a “low” income. A small town in the Midwest, for example, might have a median of $76,000 versus a larger city on the coast.
There are also some exceptions to the first-time buyer’s rule if the buyer is a displaced homemaker or a single parent whose prior residence was jointly owned with a spouse. Finally, to get the discount, you must move in within 60 days of closing and you must live in the home at least 180 days a year as your primary residence. Some exceptions apply for deployed military.