After Biden’s changes to the mortgage industry LLPA system, many wonder if credit score still matters when applying for a home loan.
Biden Changes to Mortgage Industry
During Spring 2023, the Biden administration massively rearranged the LLPA structure for Conventional home loans. Conventional home loans are those backed by the Fannie Mae and Freddie Mac. LLPA stands for Loan Level Price Adjustment. They make a borrower’s interest rate go up or down based on different factors including credit score.
Credit score based LLPA’s resurfaced looking very different after Biden put his spin on them. In fact, in some cases borrowers with higher credit scores saw a more severe rate adjustment than those with lower credit score relatively speaking.
Is Credit Score Still Important on a Mortgage?
While credit score LLPA’s for lower credit scores (scores under 680) are less severe post Biden, those with lower credit scores still pay a higher interest rate. Conversely, higher credit score borrowers reward is a lower interest rate. Ultimately, in the end even after Biden’s changes credit score is still very important when getting a home loan.
Regardless of the recent changes or any changes to come, lower credit score will always equal a higher rate. However, in addition to getting a higher interest rate – lower credit also means a higher mortgage insurance rate. Now, this doesn’t matter if you are putting 20% or more down. Anyone putting less than 20% down needs to understand how their credit also increases their monthly payment via mortgage insurance.