What is an LLPA, and how does my credit score change it?

How the grid works

Fannie Mae publishes a table, the LLPA matrix, that sets the adjustment for every combination of credit score and loan-to-value ratio (LTV). LTV is your loan amount as a share of the home’s price, so 10% down means a 90% LTV.

• Credit scores are grouped in 20-point bands, from 780 and above down to a lowest band of 639 and below.
• LTV is grouped in bands too, such as 80.01% to 85% or 90.01% to 95%.
• Where your score band meets your LTV band is your starting adjustment. Higher scores and bigger down payments generally mean a smaller adjustment.

In practice, the lowest band matters less than it looks. Most lenders require a credit score of at least 620 for a conventional loan, and many set their own higher minimums. Below 620, most buyers look at FHA loans, which allow scores as low as 580 with 3.5% down, or at specialty lenders whose loans are priced differently and usually cost more.

Here’s what a single band can mean. At a 90.01% to 95% loan-to-value, a score of 660 to 679 carries an adjustment of 1.625% of the loan amount. Moving up to 680 to 699 lowers it to 1.375%. On a $380,000 loan, that difference is $950.

Freddie Mac uses a similar table for the loans it buys. Its figures can differ slightly from Fannie Mae’s.

How the charge reaches you

Your lender pays the LLPA when it sells your loan, and usually passes the cost on in one of two ways: a slightly higher interest rate, or points you pay at closing. Lenders convert the charge into a rate differently, so the same adjustment can show up as a different rate from one lender to the next. The BestQualify calculator uses an average conversion and labels it as an estimate for that reason.

Other things that can add an adjustment

Credit score and down payment are the starting point. Other features of the loan can add their own adjustment:

• a cash-out refinance;
• a second home or an investment property;
• a two- to four-unit property, or some condominiums;
• a second mortgage or home equity line on the same property;
• choosing the minimum mortgage insurance coverage.

Which loans have LLPAs? At a glance

Every loan type still looks at your credit. Lenders and programs set their own minimum scores, and your score still affects which loans and rates you’re offered. The table shows only where the LLPA itself applies.

Who pays no LLPA at all

Fannie Mae waives these adjustments for some buyers, except those tied to minimum mortgage insurance coverage:

• HomeReady loans (Freddie Mac’s version is Home Possible);
• first-time homebuyers whose income is at or below 100% of the area median income (120% in high-cost areas);
• certain Duty to Serve and housing finance agency loans.

If you might qualify, ask your loan officer before you lock your rate. The waiver can be worth more than a higher credit score.

State programs can help twice

Many state housing finance agencies offer down payment or closing-cost help. Some pair it with a conventional loan that carries reduced mortgage insurance and waived LLPAs. For a buyer with a mid-range score, that combination can be worth more than several months of credit work. Program rules, income limits and minimum scores differ by state and change often, so check your state’s current terms.

Find your state’s program

LLPAs and FHA loans

FHA loans don’t use LLPAs. FHA charges mortgage insurance that doesn’t change with your credit score in the same way. That’s one reason an FHA loan can price better than a conventional loan at lower scores, and a conventional loan can price better at higher ones. The calculator compares both at your score.

What you can do about it

1. Know your band. Check which 20-point band your mortgage score falls in, and how close you are to the next one. A few points can move you into a better band.
2. Look at your down payment. Sometimes a slightly larger down payment moves you into a lower LTV band. Your loan officer can show whether it’s worth it.
3. Ask about waivers. If you’re a first-time buyer, ask whether your income qualifies.
4. Ask your loan officer about a rescore. If an error or an outdated balance is holding your score just under a band, a rapid rescore through your loan officer may help. It can’t promise a result, but it’s one of the few things that can change your score before closing.