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Why are some interest rates higher?

LLPA

Why are some interest rates higher than others? As we continue our Loan Mechanics: The Inner Workings of a Mortgage series, we’ll cover one of the reasons: Loan Level Price Adjustments or LLPAs.

LLPAs are upfront premiums added to the cost of a loan to account for circumstances that are perceived to increase risk. High loan-to-value ratios, credit scores, property type, occupancy and the various combinations of these factors impact LLPAs.

For example, a borrower with a high credit score who purchases a single-family home as a primary residence with a 30% down payment will likely be subject to few, if any, LLPAs. A lower-credit score buyer using a small down payment to buy a condo may incur several LLPAs.

LLPAs are one reason why advertised rates rarely tell the full story. Only quotes that take into account all factors for borrowers, property, use and occupancy can be accurate.

And accurate quotes and assistance are exactly what we’re here to provide. Give us a call if we can help.

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