Brighton Buyer Agent Warns Home Buyers in Brighton Michigan

April 27, 2023

There is a new set ofLoan Level Pricing Adjustments (LLPA) that are coming to the home lending business right now.

This may create problem for Brighton Michigan home buyers.

One of the reasons this country has such a high home ownership rate is that we typically have low mortgage costs for home loans. A reason for that is the standardization of loans by some giant pseudo-government entities, primarily FannieMae and FreddieMac.

About 80% of home loans meet these standard guidelines, and it allows for simple exchange of loans by institutional investors. These are called “conforming loans”.

As you probably know, not everyone gets the same loan pricing when they get a loan. That is because of the LLPA. These adjustments compensate for variations in each loan, the dollar amount of the mortgage, the type of property being purchased, what the property will be used for, the credit score rating of the buyers, and even the location location of the home.

This standardization is normally great. However, when these large groups changes their standards every few years, it can create turmoil in the market.

Here are four examples of the negative impacts:

1 Pricing will now be impacted by a buyer’s total Debt To Income ratio. (DTI) If a buyer’s total monthly debt payment is above 40% they will face a pricing hit. There is a lot of concern that this will lead to additional difficulties in getting loans through underwriting, because it is a whole new measurement.?

2 For the last ~30 years if a buyer’s credit score was above 740 they basically had access to the best pricing. The vast majority of buyers in our office have had scores above 740. Now a buyer needs to have a 780 to get to the best pricing level.?

3 Refinancing will reportedly be significantly more expensive than a purchase loan.?

4 There are now situations where it makes sense for a 20% down buyer to actually just use 19% down and pay Private Mortgage Insurance, because of the interaction between downpayment adjustments and Private Mortgage Insurance (PMI) pricing.??

A really useful chart of the impacts is here:?https://ift.tt/16ibfxU

Full details:?https://ift.tt/XdM3SNR

The bottom line here is that mortgage approval criteria have changed. If you have a preapproval from the first quarter of before, you need to go back to them and get an update.

Thanks for stopping by and good luck with your home purchase.

The Home Buyer’s Agent of Ann Arbor

517 Linden Ln, Ann Arbor, MI 48103

734-662-6240

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