For the first time ever, something as boring as the Fannie Mae Loan Level Price Adjustment (LLPA) Matrix has gone viral.
On May 1, 2023, Fannie Mae rolled out higher fees and rates for borrowers with good credit and, simultaneously, gave lower-credit buyers huge discounts.
Major media outlets, TikTok, and other social media channels picked up the story, which gained incredible momentum.
Is it a conspiracy against responsible buyers? A left-wing agenda? Or a much-needed boost for lower-credit buyers? We won’t try to answer or take a side, but it is worth discussing the impacts on the average real estate investor.
Do the Fannie Mae LLPA changes affect real estate investors?
In a word: maybe.
The simple answer is that those who have high credit and use a conventional loan for financing may see higher rates. Churchill Mortgage created a fantastic chart to show where prices were “heating up” and where they were cooling.
Keep in mind that the percentages are talking about points, not rate. For instance, someone with a 760 score putting 20% down would pay 0.375% of the loan amount more than they did before, or $1,125 in additional points on a $300,000 mortgage. Instead of taking the higher cost, they could increase their rate by around 0.125%.
In short, if you buy an investment property with a conventional Fannie Mae or Freddie Mac loan with a credit score above 679, you’ll pay more than you did before.
