New LLPA Rates Now in Effect

It’s May and the new Loan-Level Pricing Adjustments (LLPA) have gone into effect. For those home buyers with good credit, it will mean a slight increase in the fees you pay for a loan. While those with lower level credit scores will pay slightly less to purchase that new home.

Loan-level pricing adjustments been around for a while. They were created when both Fannie Mae and Freddie Mac realized that adjustments to the price of loans were necessary in order stave off undercapitalization.

Rather than raising fees across the board, risk based loan-level fee were created and assessed based on the borrowers credit score.

While many factors are considered, credit score is the main driver in determining the fees that are charged for a loan. Keep in mind - we are not discussing actual mortgage rates, but instead the costs and fees related to those rates. 

At face value, the new LLPA rates appear to give those with a lower credit score a better deal, but that’s just not the case. For example, if you have a high credit score and you are putting 20% down on a new home. In this case you will pay .375% more on the interest rate than previously. If you have a lower credit score and putting 20% down, there will be a .75% improvement on the costs.

Loans affected by the new format include conventional mortgages and refinance loans purchased by Fannie Mae and Freddie Mac. FHA, VA, USDA, and HUD Section 184 mortgages are excluded from the new LLPA rates.

For more info see the Fannie Mae LLPA matrix located here

Want to know how these new rates will affect your home purchase? Reach out to your qualified real estate agent or lender for more info.

Ed Justen -DRE: 02221512  - Affiliated with  Keller Williams. All advice and information given on this blog is sourced from publicly available websites and common knowledge.  Got questions?  Click here to book 30-minute meeting with me.