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Research Publication

Mortgage costs as a share of housing costs—placing the cost of credit in broader context

March 9, 2022

Fannie Mae’s latest working paper focuses on the different components of housing costs to show the contribution of each expense to overall housing costs, specifically focusing on a breakdown of mortgage costs. The working paper matched internal Fannie Mae loan acquisition data with closing costs data to establish a pro forma of housing costs for three average borrower profiles (all purchases, first-time homebuyers, and low-income first-time homebuyers) over a typical owner’s seven-year period. The paper found that the largest contributors to housing costs are consistently non-mortgage ongoing costs, which collectively are about half of total borrower costs over the ownership period. Indeed, the largest non-mortgage expenses for all borrowers are utilities, property taxes, and home improvement expenses. It also found that transaction costs at purchase and sale comprise roughly 20 percent of total costs, with the broker fees at sale standing out as the largest such expense. 

Click here to read the Working Paper.

Click here to read the Perspectives blog.