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Don't Fall for the Fake News: Lowering Your Credit Score Won't Get You a Better Mortgage Rate.

There has been a lot of confusion around changes to loans (and interest rates) made by Fannie Mae and Freddie Mac, which guarantee a vast majority of U.S. mortgages. These changes are related to how your credit score and loan-to-value ratio relate to the interest rate you are offered. These are known in the mortgage industry as "Loan Level Pricing Adjustments" or LLPA's.

The fact is that LLPAs are indeed changing in a way that improves costs for those with lower credit scores and increases costs for some with higher credit scores. However, the gap between what low credit borrowers pay and what high credit borrowers pay is just smaller than it was.

To be clear: There is no scenario where someone with a lower credit score will have a lower fee. Better credit still equals a better rate. Chart showing outright LLPA's below.

I'd also add this is not an opinion on whether these changes are good or bad. We are just trying to clear up any confusion and offer hard facts.

The facts are that Fannie Mae and Freddie Mac have a mission to promote home affordability. These are "government sponsored entities" and do NOT act purely as a bank or credit union would and always provide better loan terms for stronger borrowers. Nope. Instead, they shift some of the cost of riskier lending off of borrowers with riskier profiles and onto some of the folks with less-risky profiles. They've always done it, but it's a bit more pronounced after these changes.

Fair or not fair? We'll leave that for you to decide.

But one thing we can unequivocally state is this - YOU SHOULD NOT STOP PAYING YOUR CREDIT CARD ON TIME TO GET A BETTER MORTGAGE RATE! This has been recommended by more than a few social media influencers over the last 24 hours. We loan officers look forward to cleaning up that mess over the next few months. Good times.

40-YEAR FHA MORTGAGE: Additionally, there is no new 40-year FHA loan, despite recent press coverage. For more check out our post from earlier this week: 40-Year Mortgage Mania: How a Misunderstanding Broke the Internet


Here is the table with outright loan level price adjustments based on credit and down payments. As you see, buyers with high credit, but low down payments are getting some of the most help (not necessarily a bad thing.) But marginal credit with medium sized down payments (15-20%) are seeing the biggest hits. KEY POINT: Whatever your down payment, high credit is always better.

DISCLAIMER: This informational is educational in nature only. Loan product availability and qualification requirements are constantly changing. If you'd like to learn more about a product, please contact on our our highly qualified loan officers.

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