Fannie and Freddie are implementing new loan level price adjustments (LLPA) based on credit score and loan to value. This is a
change for the worse from my previous post announcing the original LLPA. Now your credit score is even more critical. Some lenders are implementing these changes immediately with terms on when the loans must be locked and closed.

The following information is for purchases and rate/term refinances with mortgage terms longer than 15 years (cash out refi’s have additional hits).

The hits shown below are “to price” and not to rate.

LTV (loan to value) 60.01% to 70%
Credit Score 720 or better — no hit
Credit Score 640 -719 is a 0.500% hit to price.
Credit Score 620 – 639 is a 0.750% hit to price.

LTV 70.01 or More
Credit Score 720 or better — no hit
Credit Score 680 to 719 is a 0.500% hit to price.
Credit Score 660 – 679 is a 1.250% hit to price.
Credit Score 640 – 659 is a 1.750% hit to price.
Credit Score 620 – 639 is a 2.500% hit to price.

These “hits” are in addition to other factors that are used for pricing rates and even though I quoted lower credit scores, don’t count on Fannie/Freddie (conforming) financing…especially if you’re eyeing the temporary conforming-jumbo which requires a minimum 660 credit score.

So if you have a 719 credit score and are putting 20% down using a 30 or 20 year fixed rate mortgage, you are going to pay 0.5% more in fee than your friend with a 720 credit score. If your loan amount is $400,000, this is an additional cost of $2000. Or the “price hit” may be factored into to the interest rate. Typically (but not always) 0.5% in fee would equal about 0.125% – 0.25% higher in rate. A quarter point difference in rate runs around $65.00 per month ($775 per year).

Recommended read: How to Improve Your Credit Score.

I also encourage anyone who is considering buying or refinancing a home to meet with a Mortgage Professional as soon as possible. A little time and elbow grease may save you thousands.