What Are LLPAs, and Why Do They Matter?
What You Need to Know About the FHFA's LLPA Changes (Updated as of April 6, 2025)
If you’re thinking about buying a home in 2025, you’ve likely heard talk about changes to mortgage fees - specifically, something called Loan-Level Price Adjustments (LLPAs). These changes, implemented by the Federal Housing Finance Agency (FHFA), have been the subject of much debate in the mortgage and real estate industry. As your trusted team at SouthShore Region Mortgage Group, we're breaking it down in simple terms so you know exactly what it means for you.
🏠What Are LLPAs, and Why Do They Matter?
LLPAs are risk-based fees applied to conventional loans purchased by Fannie Mae and Freddie Mac. They are designed to offset the risk lenders take on, based on key factors like:
- Credit score
- Down payment or loan-to-value (LTV) ratio
- Property type (single-family, condo, investment, etc.)
- Occupancy (primary home vs. second home)
- Loan size and term
- Whether you're using a second mortgage or other financing
These adjustments ensure the stability of the housing finance system, and they influence the interest rate and costs borrowers pay.
🔄 What Changed?
Effective May 1, 2023, FHFA updated its LLPA matrices in an effort to improve homeownership accessibility, especially for first-time and underserved homebuyers. Here's a look at the big shifts:
âś… Fee Reductions for:
- Borrowers with lower credit scores
- Homebuyers with smaller down payments
- First-time buyers in underserved communities
These groups saw lower LLPAs, effectively reducing the cost of their mortgage and helping remove financial barriers to entry.
⚠️ Modest Fee Increases for:
- Some borrowers with higher credit scores and larger down payments
For example, a borrower with a 740-759 credit score and 20% down now faces a 1% LLPA, up from 0.5% - that's an increase from $1,000 to $2,000 on a $200,000 mortgage (CBS News).
Important Note:
Despite the increase, high-credit-score borrowers still pay less overall than borrowers with lower scores. The changes simply narrow the gap to promote fairness across borrower types.
❌ DTI-Based LLPA Scrapped
Originally, FHFA proposed adding Debt-to-Income (DTI) ratios into LLPA pricing. After industry pushback, this adjustment was rescinded on May 10, 2023, due to concerns about added complexity and cost (SPAAR).
đź’ˇ What This Means for You
If you’re a first-time buyer or someone with less-than-perfect credit, these changes could work in your favor, making homeownership more achievable.
If you're a repeat buyer with excellent credit, you may see slightly higher fees - but rest assured, your rate is still more favorable than someone with a lower score or smaller down payment.
🔍 Our Take at SouthShore Region Mortgage Group
We believe in transparency and education - and this update reinforces why it's crucial to work with a team who knows the ins and outs of today's ever-changing mortgage landscape.
Whether you're trying to understand how much home you can afford, how to improve your credit, or how to lock in the best rate possible, we're here to walk you through it - step by step.
đź“ž Ready to Talk?
Let's review your unique financial situation and create a personalized plan. These changes may have altered the numbers, but with the right strategy, your homeownership goals are still within reach.