Loan Level Price Adjustments: You'll want to know this.

Mortgage and Lending with LX Financial LLC

I first wrote about this in February. It significantly raises the rate in certain circumstances, like (a combination of) cash-outs, investment property, low credit score, high LTV. I have recently priced loans where the rates came in at close to 6.00%!  - P

What are LLPAs?
In 2007, Fannie Mae introduced "Loan Level Pricing Adjustments" (LLPAs). The concept is basic: For loans with higher risk profiles, there are additional up-front charges to offset potential long-term losses. LLPAs went up April 1st, 2011. Whether paid by the borrower upfront, or factored into a higher rate, it can drastically increase the cost of borrowing. As you read this, just remember this rule of thumb: A 1.00% additional LLPA charge on a 30-year fixed translates into an approximate 0.250% rate increase.

Most common LLPAs

1. Adverse Markets (FHA, VA, USDA loans also)

2. LTV/credit score.

3. Special features:


  • High-LTV
  • Interest-Only (IO)
  • Investment Property
  • Multiple-Unit Properties
  • ARM
  • Manufactured Home
  • Cash-Out Refinance
  • Energy Improvement Feature
  • 40-year Term (MBS only)
  • Condominiums and Cooperatives
  • High-Balance Mortgage Loans




Details: LLPA matrix
You will find the full LLPA matrix here. Note that LLPAs are cumulative. Multiple adjustment may apply. Again, a rule of thumb is that a 1.00% charge represents an approximate rate increase of 0.250% on a 30-year fixed.


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