FHFA First-Time Home Buyer Mortgage Rate Discount: Explained

The first government relief program for first-time home buyers is here. 

The Federal Housing Finance Agency (FHFA) now applies automatic mortgage rate discounts for eligible first-time buyers who use a conventional mortgage. 

This post covers the details of the FHFA First-Time Home Buyer Mortgage Rate Discount program, its eligibility requirements, and other mortgage discounts available to first-time home buyers.

How the FHFA Mortgage Rate Discount Works

The FHFA First-Time Home Buyer Mortgage Rate Discount Is HERE!

The FHFA Mortgage Rate Discount waives loan-level pricing adjustments (LLPAs) on conventional mortgages made to first-time buyers. 

LLPAs are micro-interest rate adjustments based on a buyer’s credit profile. Along with macro-rate factors such as inflation rates and U.S. housing outlooks, loan-level pricing adjustments are why home buyers get different mortgage rate quotes from their lenders.

Eight micro-adjustments affect a typical conventional mortgage: 

1. The home buyer’s credit score
2. The home buyer’s loan-to-value
3. Whether the buyer uses an adjustable-rate mortgage
4. Whether the buyer’s home is a primary residence
5. Whether the buyer’s home is a multi-unit property
6. Whether the buyer’s home is a condominium
7. Whether the buyer’s home is a manufactured home
8. Whether the buyer uses a subordinate lien

The FHFA First-Time Home Buyer Mortgage Rate Discount eliminates these micro-adjustments. Quoted mortgage rates can be as much as 1.75 percentage points lower.

FHFA First-Time Home Buyer Mortgage Rate Discount

Credit Score	Down Payment	Loan Type	Mortgage Rate Discount
620	3%	Fixed	1.75%
640	3%	Fixed	1.50%
660	3%	Fixed	1.25%
680	3%	Fixed	0.50%
700	3%	Fixed	0.50%
720	3%	Fixed	0.25%
740	3%	Fixed	0.25%
760	3%	Fixed	0.25%

Assumptions: 50 bps loan-level pricing adjustment ~ 0.25% mortgage rate
Source: Fannie Mae LLPA Matrix, Homebuyer.com

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Who Qualifies For the FHFA First-Time Home Buyer Mortgage Rate Discount

Home buyers who qualify for the FHFA First-Time Home Buyer Mortgage Rate Discount have their discount applied automatically. There is no separate application or qualification.

The five qualifying criteria are:

You must be a first-time buyer

The definition of first-time buyer is any person who hasn’t owned their main home in the last three years. Exceptions are available to displaced homemakers and single parents if their prior residence was jointly-owned with a spouse and they owned no other marital properties. 

Your home must be your primary residence

The FHFA mortgage rate discount is for primary homes only, meaning you must live in your home more than 180 days per year and use its address as your official residence. Home buyers cannot use the first-time buyer discount for vacation homes and short-term rentals.

You must move in within 60 days of closing

The first-time buyer mortgage rate discount requires buyers to take residence in their new home within 60 days of closing. If you plan to make home repairs before taking occupancy, ensure your home is habitable within two months of buying it. Exceptions apply for deployed active duty military.

You must be a low- or middle-income wage earner

The first-time home buyer mortgage rate discount is a home affordability tool for low- and middle-income wage earners. The FHFA restricts its use to buyers whose income falls below the area median income, with income exceptions made in high-cost areas. 

You must use a conventional loan

The FHFA is the parent to Fannie Mae and Freddie Mac, so its first-time home buyer program applies to conventional mortgages only. Home buyers using an FHA mortgage, a VA mortgage, or a USDA mortgage don’t have access.

Common Questions About The FHFA First-Time Home Buyer Mortgage Rate Discount

How do I apply for the FHFA mortgage rate discount?

There is no application for the FHFA First-Time Home Buyer Mortgage Rate Discount. Eligible buyers receive their discount automatically.

Am I eligible as a first-time home buyer if my spouse owned a home previously?

The FHFA’s definition of a first-time home buyer requires each mortgage applicant not to have an ownership interest in a home within 36 months of closing. Buyers cannot claim the interest rate discount if the spouse is on the mortgage application and is not a first-time buyer. 

Am I eligible for the program if I’m buying a mobile home?

Yes, buyers of mobile homes are eligible for the FHFA First-Time Home Buyer Mortgage Rate Discount. 

Will this discount apply if I’m currently closing on a home?

No, the FHFA mortgage rate discount applies to mortgage loans that close on or after December 1, 2022. Today is April 25, 2024, so the discount applies.

When will the FHFA mortgage rate discount program pass into law?

The Federal Housing Finance Agency (FHFA) is a government group and parent of Fannie Mae and Freddie Mac. Congress does not control the FHFA, so the group does not need Congressional approval to make changes for first-time buyers.

Does the FHFA mortgage rate discount get rid of g-fees, too?

The FHFA First-Time Home Buyer Mortgage Rate Discount does not eliminate conventional mortgage guarantee fees (g-fees). G-fees are administrative costs linked to the servicing and collecting payments on a loan.