Loan Level Price Adjustments Explained
L.L.P.A’s (Loan Level Price Adjustments) are the algorithms that determine what a borrowers rate will be based on credit score, down payment and type of loan. Below is a grid for Conventional loans L.L.P.A’s per Fannie Mae Guidelines.
The left most column is credit score, varying between 620 and 740 in increments of 19 points. That means every 19 points above a 620 FICO score your price adjustments get better.
The next 8 columns are Loan-To-Value ratios, you can also consider this the down payment. The first column is <60.00% or lower. Meaning that you are only financing 60% of the value of the home or less, equivalent to a 40% down payment. The higher the credit score in and the large the down payment you will notice the lower the adjustment. That is because a borrower that puts down a larger down payment and has a higher credit score is viewed as less of a risk, therefor granted a better rate because the lender feels confident they will get their money back.
The adjustments increase as you move over to the right in columns, a borrower that puts 20% down has a .500 adjustment if their credit score is between 720-739. Feel free to examine the grid and ask questions.
Other L.L.P.A’s
Below is a continuation of the L.L.P.A grid. It includes cash out refinances, which have increased adjustments due to their higher risk factor:
You may notice the “other adjustments’ section at the bottom of the picture. These are standard adjustments that apply to all conventional mortgage regardless of down payment and credit score. Things like investment properties and escrow waiver fees.
If you have further questions about how this grid works, or how it applies to you, please ask me here. Or you can contact me directly via email or phone at the contact information below:
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Justin Scott
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NMLS 878581
- C) 920-530-4484
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Executive Mortgage
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909 . E Walnut Street
Green Bay WI 54301