INDUSTRY

FTHB Advantage

Over the past year, there have been significant changes to Loan Level Price Adjustments (LLPAs) that have made it more expensive for investors and second home buyers to use
conventional financing. As a real estate agent, it’s important to understand what LLPAs are and how they impact your clients.

• What the heck is an LLPA? They are adjustments made to the cost of a specific interest rate based on factors such as the borrower’s FICO score, the type of property being purchased, and the Loan to Value (LTV) ratio. These adjustments can significantly increase the cost of a mortgage, making it more expensive for certain borrowers, such as those purchasing investment properties or those with lower credit scores.

Existing home owners are now being targeted as well. New LLPAs that launched in January 2023 for borrowers who are accessing equity through cash-out refinances. These costs are expected to exceed $3,000 and will be absorbed into the interest rate, leading to higher rates for these borrowers

Fannie Mae and Freddie Mac announced that they will be waiving LLPAs for first-time buyers who meet certain income requirements. This could make it more affordable for first-time buyers to purchase a home. Every single 1st time buyer should be double checked by Loan Officers to see if they are eligible for these
waivers. This is not a different loan program, just a perk.

Big push for 1st time buyers

Overall, it appears that the goal is to encourage first-time buyers to enter the market. However, this comes at the expense of other borrowers who are facing higher mortgage costs due to the new LLPAs.

• Who’s being hurt? Investors, 2nd home buyers and existing home owners looking to access equity.
• Who’s being helped? First time buyers… at least those that can afford a $3,000 – $6,000 payment.

These waivers are worth anywhere from $600 – $15,000+ depending on the specific situation for the first-time buyer. The worst thing you can do is keep this a secret from your clients!!

📢 As a real estate agent, it’s important to keep these changes in mind and to help your clients navigate the complex world of mortgage financing.

• 🔎 You may want to consider recommending alternative financing options for your clients that are not subject to these new costs. Most lenders and brokers have access to some sort of portflio or jumbo product that could circumvent these LLPAs.

• 📰 Additionally, make sure to keep your clients informed of these changes, both positive and negative, so they can make the best decision for their financial situation.

• 💡 Finally, if you have clients who are first-time buyers, now may be a good time to take advantage of the waived LLPAs while they are still available.