Fannie Mae and Freddie Mac made changes to the Loan Level Price Adjustments (LLPAs) fee structure effective May 1, 2023.
What is an LLPA?
Loan Level Price Adjustments are loan fees charged to borrowers based on factors like credit score, down payment, and other factors.
What changes are being made?
The most recent LLPA changes from Fannie Mae and Freddie Mac are intededto reduce the cost of loans for borrowers with lower credit scores and lower down payments; helping a greater number of people find a path toward homeownership.
How do these pricing changes impact homebuyers?
Here’s what homebuyers should expect as a result of the changes to LLPAs:
- Smaller price adjustments for lower credit score borrowers with lower down payments, thus reducing the impact of the new price adjustment for these borrowers.
- Larger price adjustments for higher credit score borrowers with larger down payments.
- Lower credit score borrowers still pay higher LLPAs overall compared to higher credit score borrowers with larger down payments.
- Pricing on loans for the higher credit score borrower with a larger down payment and lower debt-to-income ratios is still better than other borrowers.
What about first-time homebuyers?
Most importantly, first-time homebuyers whose income levels allow them to qualify for special programs offered by Fannie Mae and Freddie Mac will avoid these LLPAs altogether.
First-time homebuyers who qualify for Fannie Mae’s Home Ready program or Freddie Mac’s Home Possible program will avoid the new LLPAs, giving them a better interest rate than borrowers who do not qualify for these programs.
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