Hidden Fees That Cost You Thousands When Financing a Home

Beware of your credit score, it may be costing you thousands of dollars when financing a home.  Fannie mae and Freddie Mac, since being bailed out by the American taxpayer, have instituted "loan level pricing adjustments".  LLPA's are increased costs paid by the consumer borrowing money from lenders.  These fees are not profits that go to the lender's coffers, rather thousands of dollars that go directly to the institutions that own more than 50% of the mortgages in America.

The LLPA's range from .25% - 5% of the loan amount.  What used to be considered a "good" credit score, now can cost a consumer $1, 2, 5, 10,000 extra in fees or a substancially higher interest rate for the duration of the loan.  With all of the chnages in Washington regarding financial reform and transparency, it should be noted that these costly adjustments have gone under the radar and are non-transparent to the consumer.  To look at the adjustments click here, this is a link to the LLPA matrix on the Fannie Mae site. 

LLPA's do not stop at adjustments for credit only, there are adjustments for non-escrow, purpose of the loan, occupancy of the property and loan to value.  These adjustments are accumulated.  An example - A borrower with a 679 credit score on a 80% ltv would pay 2.5% X the loan amount additionally for a rate.  The same borrower purcasing a 3 family house to occupy would pay an additional 1 point or 3.5 points total due to the number of units.

My advice is to monitor your credit score.  If at any point it falls below 740, have a professional review it for recommendations which can lead to pushing your score higher over time.