In Credit Scoring, Every Point Counts

Mortgage and Lending with Sierra Pacific Mortgage Company, Inc. NMLS# 234196

Most everyone knows that credit scores can make or break a person's ability to obtain financing to purchase a home.  But most people don't realize how big a factor credit scoring plays in the cost of borrowing.

The Agencies, Fannie Mae and Freddie Mac, initiated Loan Level Price Adjusters (LLPA) in April of 2009.  These adjusters were created to adjust for risk associated with credit score and loan-to-value (LTV).  Small changes in credit score and/or LTV can mean very significant increases in closing costs or interest rate.  Below is a copy of a LLPA table.  The column on the left indicates the credit scores and the top row lists LTVs.  You can see that there are a whopping 49 different adjustments possible!


Even borrowers with the best credit scores, those 740 or greater, are perceived to have a higher risk if the LTV is 75.01% or greater.  In this example the borrower, with a loan amount of $200,000, would be levied a 0.25 point charge, which amounts to $500.

A borrower with a credit score of 699 would be hit with a 1.75 point charge, amounting to $3,500, for that same $200,000 loan amount.  Looking at the lower credit scores, you can see that the adjustment can be as high as 3.25 points, amounting to a $6,500 charge!

Never has it been more important to have your financing in place before beginning your home search.  Credit reports quite often have errors which can be corrected, which can increase your credit score.  Often the elimination or balance reduction in an account balance will raise your credit score enough to save you thousands of dollars in LLPA fees.

If you have any questions regarding LLPA's, credit scoring, or financing your home, please send me an email or give me a call.

Posted by

Mike McIntosh, CMPS NMLS#234196 916 780-6400 or 888 232-9025

Mike McIntosh  

      Mike McIntosh, CMPS

      Mortgage Planner

      916 780-6400

      888 232-9025

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Comments (5)

Ronald DiLalla
Century 21 Discovery DRE 01813824 - Anaheim, CA
No. Orange Cty Real Estate

Hi Mike, great info..thanks for sharing.

May 13, 2011 08:05 PM
Mike McIntosh
Sierra Pacific Mortgage Company, Inc. - Granite Bay, CA
FHA VA CVL Home Loans California - 916 780-6400

You're welcome Ronald.  I hope that you can use the information to help your clients save money!

May 13, 2011 08:17 PM
Dan Edward Phillips
Dan Edward Phillips, Humboldt and Del Norte Counties, CA - Eureka, CA
Humboldt and Del Norte Counties, CA

Good morning Mike, excellent input for potential buyers to understand.  A 'point' can make a big difference!

May 13, 2011 08:25 PM
Mercedes E. Santana
Santana Property Group - New York, NY
NYC Multifamily Properties

Mike- This is very helpful. It's good to be armed with this info.  A well informed Agent is a major plus for buyers.

May 14, 2011 03:12 AM
Mike McIntosh
Sierra Pacific Mortgage Company, Inc. - Granite Bay, CA
FHA VA CVL Home Loans California - 916 780-6400

Dan and Mercedes - Thanks for your comments.  One of the greatest challenges that we face today is lack of funds for down payment and closing costs.  Proper management of credit history can change a renter to a home owner.

May 14, 2011 05:23 AM