4/25/23 – LLPA changes coming May 1, 2023

There has been a lot of talk lately about the Loan Level Price Adjustments (LLPA’s) going into effect on May 1, and I am just smiling and shaking my head! The first chart is the best I have seen, but I want you to know that when I started in the mortgage business 33 years ago, there were no additional fees if you had a poor credit score! If you had a 620 or a 760 score, with 5% down, you would get the same interest rate! From what I can see, they are hitting the middle of the page the hardest. 80.01 – 85.00 LTV with a 680-779 credit score. The first chart represents the changes to the LLPA’s.

The second chart shows actual LLPA hits as of May 1. You will see that better credit scores always get a better interest rate! These changes are an adjustment by FHFA not to penalize a poor credit score as much as they have in the past. Do these changes seem right? NO, but it is what it is, and FHA still makes more sense with lower credit scores!

So the crazy one to me is that interest rates will be better with 5% down vs., say, 15% down or 20% down! Everyone needs a trophy! The PMI with a 630 credit score and 5% down will be MUCH HIGHER than a 630 score with 15% down! So now we are all equal, and everything is fair, and people with poor credit are still paying a little more for the time they have PMI! Oh, and yes, when the PMI goes away after two years, the person who put down 15% still pays a higher interest rate than the person who put down 3%, so all is not fair in this crazy world. They should have put a Mom in charge of this if they wanted it to be fair for everyone, but that didn’t happen, and we will have to live with the consequences.

The story’s moral is that life isn’t fair, but if we save money, work hard, and go the extra mile, we won’t feel this. We could have people with 15% or 20% down put down 5% to get the lower rate, and then they can make a lump sum payment and have a lower rate at the end of the day. It should help first-time buyers with a low down get a more reasonable interest rate, and it should make all of our lives more complicated and push a few more loan officers out of the business! Check out the charts and enjoy! By the way, see the chart images below. We even have one in color which is beautiful to see in full bloom!

Interest rates have been improving since last Monday, but we are still far away from our February lows! Let’s keep this momentum; before you know it, prices will be even higher, interest rates will be lower, and people will be making the same payment! LOL!

• 12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge

• 0 down California Dream for all Equity Share – Postponed until 2024!

• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!

• Government Loans (FHA / VA) are in the low to mid 5’s.

• Conventional Loans up to $726,200.00 are in the mid 5’s to low 6’s.

• High Balance Loans $726,201.00-$ 1,089,300.00 are in the high 5’s and low 6’s

• Jumbo loans above $1,089,300 are in the low to mid 6’s

• 5/1, 7/1, 10/1 Arms are in the 5’s and 6’s.

• Bank statement loans - They are available with 10% down again! 7’s + depending on down and credit score.

• Stated income loans – 20% down with reserves! In the 8’s and 9’s!

• 0 down loans are in the high 5’s to low 6’s- 620 credit score min right now! Low 6’s, for the most part, up to $725,000.00.

• Private Money lenders - hard Money Loans – 35% down!

• No Ratio Loans 30% down

• Debt Service Coverage loans with as little as 25% down

• Bridge Loans - are typically 6.99% with limited fees – But they get you where you need to go!

Interest rates are subject to change without notice! Above are LA County Loan Limits.

I am around all week if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!