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Ryan Shoemaker's Blog

By ABC | Home Owner in Omaha, NE
  • Loan Fees Set To Rise For Conforming Mortgage Applicants

    Posted Under: Home Buying in Omaha, Financing in Omaha, Credit Score in Omaha  |  March 10, 2011 8:02 AM  |  143 views  |  No comments

    LLPA rising April 1 2011Beginning April 1, 2011, Fannie Mae is increasing its loan-level pricing adjustments. Conforming mortgage applicants in Nebraska should plan for higher loan costs in the months ahead.

    If you’ve never heard of loan-level pricing adjustments, you’re not alone; they’re an obscure mortgage pricing metric and, thus, are rarely covered by the media. That doesn’t make them any less relevant, however.

    LLPAs are mandatory closing costs assessed by Fannie Mae and Freddie Mac, designed to offset a given loan’s risk of default. LLPAs were first introduced in April 2009.

    This April’s amendment is the 6th increase in 2 years. LLPAs can be costly.

    In addition to an up-front, quarter-percent fee applied to all loans, there are 5 additional “risk categories” in the LLPA equation:

    1. Credit Score : Lower FICO scores trigger additional costs
    2. Property Type : Multi-unit homes trigger additional costs
    3. Occupancy : Investment properties trigger additional costs
    4. Structure : Loans with subordinate financing may trigger additional costs
    5. Equity : Loans with less than 25% equity trigger additional costs

    Adjustments range from 0.25 points (for having a 735 FICO score) to 3.000 points (for buying an investment property with just 20% downpayment). And they’re cumulative. This means that a borrower that triggers 3 categories of risk must pay the costs associated with all 3 traits.

    Loan-level pricing adjustments can be expensive — up to 5 percent or more of your loan size in closing costs. The fees can be paid a one-time cash payment at closing, or they can be paid in the form of a higher mortgage rate.

    The loan-level pricing adjustment schedule is public. You can research your own loan scenario at the Fannie Mae website, but you may find the charts confusing.

    Phone or email your loan officer if you’re unsure of what you’re reading.

    If you are buying a home in Nebraska, I am happy to help you understand your scenario and corresponding interest rate adjustments.

  • Applying For A Mortgage Soon? Don’t Open New Credit Cards.

    Posted Under: Home Buying in Omaha, Financing in Omaha, Credit Score in Omaha  |  February 23, 2011 11:22 AM  |  149 views  |  No comments
    FICO recipeIf you are planning to purchase a home this spring, think twice stay away from opening new credits cards while you are out at the mall.

    Many retail stores offer a discount up to 20% for opening a new charge card with their store.  The short-term savings may be tempting, but the long-term costs may be huge.

    It’s because of how credit scores work.

    According to myFICO.com, “new credit” accounts for 85 out of 850 possible credit scoring points, with new credit defined by such traits as:

    • Number of recently opened accounts
    • Number of recent credit inquiries
    • Time since recent credit inquiries
    • Proportion of new accounts to all accounts

    These traits are negatives against a FICO score so with each new, in-store credit card application, a person’s credit score will fall. The fall will be especially pronounced for persons lacking credit “depth”, or who have made a disproportionately large number of new credit applications recently.

    For soon-to-be homeowners, or would-be refinancers in Omaha , credit scores are worth keeping high. This is because credit scores change the mortgage rates and/or loan fees for which an applicant is eligible.

    As an illustration, assuming 20% equity on a $200,000 conforming loan:

    • 740 FICO : No added loan costs
    • 720 FICO : 0.250% increase in loan costs, or $500
    • 700 FICO : 0.750% increase in loan costs, or $1,500
    • 680 FICO : 1.500% increase in loan costs, or $3,000
    • 660 FICO : 2.500% increase in loan costs, or $5,000

    It’s expensive to have a low credit score — more expensive than the money saved by opening a card at the mall, anyway.

    That said, if you know you won’t need your credit for a mortgage within the next 6 months, the risk of applying for in-store credit cards is likely small. But if you’ll need your FICO soon, consider paying for your gifts full price.


    Provided by: Ryan Shoemaker, www.mortgagerundown.com
 
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