New LLPA favors first-time homebuyers
Fannie Mae and Freddie Mac (the agencies) released their new LLPA (loan level pricing adjustment) in February. This new matrix is effective on and after May 1, 2023. However, most lenders will start implementing this new pricing matrix in March/April. Here are some insights from the new pricing matrix:
80% down payment is no longer the magic number for high credit score applicants. To avoid LLPA & MI (mortgage insurance), now higher credit score applicants (780+) needs to have at least 25%
All LLPA will be waived for first-time homebuyers with qualifying income equal to or less $149,520 in metro Seattle area.
The new LLPA favors people with lower down payment that need to have mortgage insurance
It is not a good time for investment properties and second homes
There will be a pricing hit for DTI (debt to income) greater than 40%
In summary, FHFA wants to protect first-time homebuyers with moderate income, and does not want to encourage investment (aligns with the fight to put down inflation). However, they also worry that the higher interest rate will destabilize the market, so they want people to put more down payment into the house, or have mortgage insurance as the back up, and also discourages people who have higher DTI.