What Is Loan-Level Price Adjustment (LLPA)?
Loan-Level Price Adjustment (LLPA): Fannie Mae and Freddie Mac pricing charges based on credit score, loan-to-value and other risk factors.
Also called: LLPA
Loan-level price adjustments (LLPAs) are risk-based fees that Fannie Mae and Freddie Mac charge on conventional loans. Lenders usually build them into your interest rate rather than charging them separately.
What drives them
- Credit score, in bands of roughly 20 points
- Loan-to-value ratio
- Occupancy: investment properties and second homes cost more
- Property type: condos and two- to four-unit homes can cost more
- Cash-out refinances
Example
Two borrowers buying the same home with 10% down could get different rates because one has a 760 score and the other a 680, entirely due to LLPAs.
Good to know
First-time buyers under certain income limits, and some affordable loan programs, have LLPAs waived. FHA and VA don't use LLPAs, which is one reason they can be cheaper for lower scores.