What New Loan-Level Price Adjustments Looks Like to Buyers

Fannie Mae’s and Freddy Mac’s recent changes to loan-level price adjustments (LLPA) went into effect May 1 and it’s leaving many wondering what this means. According to lenders I spoke with, borrowers in the higher credit score (680  and higher) range will pay about .125 more than before. Lower credit scores will save more. The more you put down (15% or more), the more you pay in a surcharge too. My interpretation of this change is that it’s no longer as advantageous to have good credit. However, it beats the alternative of having bad credit. It also appears that these changes aim to drive good creditors to pay mortgage insurance fees to help offset risky borrowers.

General consensus among lenders is that if you have good credit and a good chunk of money to put down, tuck the cash away and make a lower down payment. Later, you can refinance the loan and pay it down at that time to eliminate PMI. (There’s a chance these loan-level price adjustment changes will be reversed sometime in the future.) You should also run the numbers of putting the extra money toward paying points for a better interest rate. It may not be the best option most of the time, but worth looking at. Bottom line is … you’ll be okay. Loans can be refinanced or paid off. Interest rates are still relatively low BUT expected to continue to climb for some time so there’s no better time (except in the past) to purchase a property.

Want a local lender recommendation to see what these changes mean in real numbers? Contact me.