Conventional California mortgage rates may be posting all-time lows this week, but that doesn’t mean you’ll be eligible for them. If thinking about refinancing or buying a home in the Inland Empire, you may have already called a loan officer and found this out the hard way.
It’s because of a federally-mandated mortgage-pricing scheme known as “Loan Level Pricing Adjustments” (LLPA).
In effect since April 2009, loan-level pricing adjustments are changes to a loan’s base rate and/or fee structure based on that loan’s inherent risk is to Wall Street. It’s similar to auto insurance pricing adjustment in that a sports car, all things equal, will cost more to insure than a comparably-priced minivan.
More risk = more cost to the consumer (you).
In mortgage lending, loan risk can be loosely grouped into 5 categories. Mortgage applications in the Inland Empire featuring any of the five traits are subject to price adjustments:
- Credit Score (i.e. the borrower’s FICO is below 740)
- Property Type (i.e. the subject property is a multi-unit home)
- Occupancy (i.e. the subject property is an investment home)
- Structure (i.e. there is a subordinate/junior lien on title)
- Equity (i.e. mortgage insurance is required by the lender)
Furthermore, loan-level pricing adjustments are cumulative. Add them up and it can impact the rate you can receive. All banks must comply with these LLPA’s, so don’t be tricked bu some LO who quoets a cray low rate to you. I have actually had people tell me other Loan Officers have told them they are exempt from these LLPA’s. This is either pure deception or, based on too many assumptions, or the Loan Officer is clueless on how to properly price and quote an interest rate…..which happens more then you think.
A 3-unit investment home will face larger adjustments than an owner-occupied 3-unit home, for example. It’s these adjustments that explain why you may not be eligible for the rates you see advertised online and in the newspapers — your particular loan may be subject to this risk-based pricing that raises your mortgage rate and closing costs.
The government’s loan-level pricing adjustment schedule is public information because ALL Conventional loans must adhere to these adjustments. See the information for yourself and the variables your loan quote is made up of at the Fannie Mae website. Or, if you find the charts confusing, just call or email me for help with the interpretation. I do this everyday, all day…..transparency is the best policy.
FHA, VA and USDA loans have similar price adjustments but are determined by each investor or bank. To learn what price adjustments you may have for an FHA, VA, or USDA loan, call me. I can provide home loan financing anywhere in California, but focus on the Inland Empire, which consists of Riverside & San Bernardino counties, Temecula, Murrieta, Menifee, French Valley, Lake Elsinore, Hemet, Canyon Lake, Corona, Norco, Moreno Valley, Fontana, Rancho Cucamonga, Chino, and many other cities.