We all know that BAD News, spreads like wildfire, and good news might get a small mention.

Effective: May 1st we will have new Loan Level Pricing Adjustments on conforming mortgages, across the board.

We have all heard that the Federal Housing Finance Agency has come out with new LLPA's to punish those with GOOD credit and reward those buyers with BAD credit. This is not true. These new adjustments effect all conforming loans except those for first-time homebuyers with lower income.  ALL conforming loans require a minimum credit score of 620.  Which is not a stellar credit score but still is a Good credit score.

What are LLPAs, Loan Level Adjustments?

First of all, these adjustments only effect "conforming" conventional loans.  This does not affect FHA, VA or USDA loans.

My best explanation of LLPA's is the loans characteristics or Rate = Risk.

The new LLPA's will cost all people looking for mortgages across the board.  It will be more evident with cash out refinances, high-balance loans in high-cost areas, and borrowers with credit scores between 680-739.

This is the middle-class borrowers.  If they are not first-time home buyers and have credit scores in the middle of the road with higher loan to values they will see the pinch.

Buyers with 740 and above will see an increase like everyone else BUT they are not being punished for having GOOD credit. 

The sticking point where the media has it twisted is the underserved first-time homebuyers.  If the buyers make below the area median income, they qualify for special "first-time homebuyer programs" which do not have the new LLPA's or old LLPA's for credit score and loan-to-value. 

It is important to note that these are programs already in existence and are now becoming more available for those who might not be able to buy a home without a lower rate, closing costs and mortgage insurance.  It is not a punishment for good credit nor is it a reward for people with bad credit.

It is our job as experts in the real estate market to dispel the media's false narrative and to reassure buyers that now is still a good time to buy.  In most markets we are seeing that it is cheaper to own a home than it is to rent.  These LLPA's hopefully will help people who meet conforming loan guidelines to be able to get into homeownership with a more affordable mortgage loan program. 

This is not what we saw happen to cause the mortgage meltdown.  These programs are for Conforming Qualified Mortgage products.  All buyers still have to show an ability to repay the mortgage.  These are not fog a mirror and get a mortgage loan products.

I would love to discuss this any other questions that you might have about mortgages and mortgage products.  Please feel free to reach out at any time.   I work when you work nights and weekends, just call me!

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.